China Construction Bank Corp., the nation’s second-biggest lender by assets, agreed to pay 1.62 billion reais ($723 million) for a majority of Brazil’s Banco Industrial & Comercial SA.
The 72 percent stake will include 157.4 million voting shares and 24.7 million preferred shares, which Construction Bank plans to buy for 8.9017 reais each, BicBanco, as the Sao Paulo-based firm is known, said yesterday in a filing. The price values the entire Brazilian bank at 1.16 times its book value as of June 30, according to data compiled by Bloomberg.
Acquiring a lender is the easiest way for Beijing-based Construction Bank to obtain a license in Brazil as it follows customers to the nation, a person with direct knowledge of the matter told Bloomberg News earlier this week. China and Brazil in March agreed to establish a $30 billion currency swap line and China National Petroleum Corp. last week won the rights to help develop Brazil’s biggest oil discovery in the Libra field.
The Chinese lender will make an offer to buy the remaining stock within 30 days after completion of the deal, which needs approval by regulators in Brazil, China and the Cayman Islands.
Construction Bank rose 0.5 percent to close at HK$6.05 in Hong Kong, narrowing this year’s decline to 2.7 percent. The benchmark Hang Seng Index added 0.2 percent, for a gain of 2.6 percent in 2013.
Chinese banks, facing a rise in domestic competition, are accelerating global expansion as demand for offshore financial services surges along with the growing presence of Chinese companies in overseas markets.
Construction Bank, which added operations in countries including Russia, Dubai and Japan this year, now has 17 subsidiaries with assets of about $120 billion in 15 nations, according to a statement on the opening of its Luxembourg unit on Oct. 31.
The acquisition of BicBanco, which specializes in loans to mid-sized companies, is Construction Bank’s first outside mainland China since it bought a Hong Kong unit of American International group Inc. for $70 million in November 2009.
Construction Bank’s bigger rival, Industrial & Commercial Bank of China Ltd., is also expanding in Latin America. Beijing-based ICBC bought 80 percent of Standard Bank Group Ltd.’s Argentine division last year, after having opened in Peru and received authorization to open a bank in Brazil.
Citigroup Inc. advised BicBanco on the sale, according to the filing. Morgan Stanley is advising Construction Bank, the person with knowledge of the matter said this week.