China Mobile signs $5.8b deal for SPD stake

Nicole McCormick
11 Mar 2010

China Mobile has inked a deal to buy a 20% stake in the Shanghai Pudong Development (SPD) Bank for 39.8 billion yuan ($5.83 billion).

Chairman and CEO Wang Jianzhou said he was confident the deal would win the required clearances of the raft of regulatory agencies that supervise two firms’ businesses.

Under the deal, Guangdong Mobile – China Mobile’s biggest subsidiary - will purchase 2.2 billion new A Shares in SPD Bank for cash, becoming the second largest shareholder in SPD Bank after Shanghai International Group and its affiliates.

Guangdong Mobile has signed a Memorandum of Understanding (MoU) with SPD Bank “to closely cooperate in the joint development of mobile finance and mobile e-commerce businesses.”

The investment requires approval from China’s banking regulator CBRC, securities watchdog CSRC and the state-owned assets agency SASAC as well as SPD Bank shareholders.

China Mobile parent China Mobile Communications (CMCC), which owns 74.22% of the Hong Kong-listed company, has “indicated that it would approve the share subscription agreement” and is advising remaining shareholders to do the same.

A senior SASAC official said earlier this week that the agency was opposed to state-owned enterprises (SOE) buying into non-core businesses. It also would not accept government industrial enterprises buying into banks.

But Wang yesterday dismissed reports of SASAC opposition to the deal and claimed that it met all regulatory stipulations, the WSJreported.

He denied that China Mobile had received government instruction to invest in SPD Bank, but said the firm has no plans to invest in real estate or other non-core businesses.

"This investment is an extension of our core telecom business,” Wang is quoted by the WSJ as saying.

He expects the deal to increase China Mobile’s earnings per share by 2%.

China Mobile has agreed not to divest its SPD Bank stake for at least 36 months, but has no plans to raise its stake above 20%.

It can elect three directors to the bank’s board.

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