July 12 (Bloomberg) -- Bank of Nova Scotia, Canada’s third-largest lender, said it has withdrawn its bid to buy a 20 percent stake in China’s Bank of Guangzhou.
“Since announcing the proposed investment in September of 2011, Scotiabank and the City of Guangzhou have re-evaluated the proposed partnership in light of changing conditions,” the Toronto-based bank said today in a statement.
Chief Executive Officer Richard Waugh, 65, said during Bloomberg’s May 21 Canada Economic Summit that he had been too optimistic about a swift completion of the C$719 million ($692 million) deal to buy a stake in the city-owned Chinese lender. Waugh said that political changes at the federal and municipal level in China affected negotiations.
“Those partners are now re-evaluating their position -- do they need a strategic partner?” Waugh said at the conference. “The issue isn’t Scotiabank.”
Scotiabank rose 0.2 percent to close at C$57.05 in Toronto. The stock has declined 0.7 percent this year, compared with the 0.9 percent advance of the eight-company Standard & Poor’s/TSX Commercial Banks Index.
Calls made after hours to Bank of Guangzhou’s headquarters weren’t answered.
The decision is “not a game changer,” Jeff Young, chief investment officer at Toronto-based NexGen Financial Corp., said in a telephone interview.
“It’s more of a setback,” said Young, who manages about C$1 billion including Scotiabank shares. “It’s not going to impact long-term Scotiabank’s international expansion plans.”
Darko Mihelic, an analyst at Cormark Securities Inc. in Toronto, said he viewed the aborted acquisition as a positive for Scotiabank.
“If you announce a deal and it takes this long to close, something smells,” he wrote in a note to investors. “Better to walk away than to get tangled up in a long-term painful partnership.”
Scotiabank has expanded throughout Asia, with operations in countries including China, Japan, Korea, India, Thailand and Vietnam. The bank has been in China for more than 30 years, and has a minority stake in China’s Bank of Xi’an.
“Scotiabank will continue to consider future opportunities for investment in China that are in line with our strategy and footprint in the region,” Dieter Jentsch, group head of international banking, said in today’s statement.