Deutsche Bank Said to Mull Forgoing IPO Amid China ProbesCathy Chan
Deutsche Bank AG is weighing whether to refrain from working on China General Nuclear Power Group’s initial public offering amid a probe into hiring practices in Asia, three people with knowledge of the matter said.
Germany’s largest bank employs the daughter of Shenzhen-based China General Nuclear’s chairman, He Yu, said the people, who asked not to be named as the deliberations are confidential. The Frankfurt-based lender, which has helped the company prepare for the IPO for about nine months, received a request for information on its hiring practices from the U.S. Securities and Exchange Commission late last year, one of the people said.
Global investment banks have come under scrutiny after the U.S. opened a criminal investigation last year into whether JPMorgan Chase & Co. violated anti-bribery laws by employing children of China’s elite. JPMorgan, the biggest U.S. bank, has dropped out of two share sales for Chinese companies since that probe began, according to people with knowledge of the actions.
U.S. regulators haven’t made any allegations of wrongdoing, the people said. “We wouldn’t comment on who we might have sent letters to in any industry sweep and I wouldn’t have any comment on this particular issue either,” said John Nester, a spokesman for the SEC.
Michael West, a Hong Kong-based spokesman for Deutsche Bank, declined to comment on whether the bank employs He Yu’s daughter or on whether it’s debating its participation in a possible deal. A spokesman for China General Nuclear said the company hasn’t started work on an IPO and hasn’t named any banks. The spokesman said He Yu’s daughter Celia isn’t currently working for Deutsche Bank.
Celia He said she didn’t have time to talk when reached on her mobile phone. She didn’t answer subsequent calls.
Deutsche Bank started working for China General Nuclear before employing the chairman’s daughter. The bank helped China General Nuclear and China Development Bank Corp. acquire Extract Resources Ltd. in a deal that started before Celia He joined Deutsche Bank’s Chinese venture, one of the people said. The bank also handled the company’s transaction-banking services, the person said.
A role in China General Nuclear’s IPO could also put Deutsche Bank at odds with the German government, one of the people said. German Chancellor Angela Merkel aims to more than triple the share of renewable energy to 80 percent of Germany’s electricity by 2050, with Europe’s biggest economy set to shutter its nuclear reactors by 2022.
Deutsche Bank hasn’t reached a final decision about whether to seek a role in the IPO or not, the person said.
Celia He was hired in September 2011 by Beijing-based Zhong De Securities Co., which is part-owned by Deutsche Bank, two people with knowledge of the matter said. In May 2012, she was recruited into Deutsche Bank’s investment-banking department, they said. She has also worked in global credit trading, they added.
China General Nuclear, the nation’s biggest producer of nuclear energy, has yet to decide whether it will sell shares on the mainland or in Hong Kong, two of the people said.
Deutsche Bank and China International Capital Corp. have been helping the company prepare for the IPO by reorganizing assets and businesses without an official mandate, one of the people said. The energy company will invite banks in mid-April to compete for underwriting the IPO, which may seek to raise $2 billion to $3 billion, two of the people said.
Zhang Xiao Xiao, a spokeswoman for CICC in Beijing, declined to comment.
The attention of regulators on hiring has put some Wall Street firms on the defensive. JPMorgan, which hasn’t been accused of any wrongdoing, decided to quit China Everbright Bank Co.’s Hong Kong share sale in November because the hiring investigation delayed an internal approval process, according to two people with knowledge of the matter. In January, JPMorgan bowed out of Tianhe Chemical Group’s IPO as questions arose over the firm’s previous employment of the daughter of Tianhe’s chairman, according to two people with knowledge of the matter.
Fang Fang, JPMorgan’s chief executive officer of investment banking in China, decided to retire after more than 12 years at the firm, according to an internal memo obtained by Bloomberg on March 24. Two days later, Hong Kong’s Independent Commission Against Corruption seized computer records and documents after searching Fang’s office, according to two people with knowledge of the matter who asked not to be identified because the investigation is confidential. A spokeswoman for New York-based JPMorgan and a spokesman for ICAC declined to comment.
The Securities and Exchange Commission has also asked Goldman Sachs Group Inc., Morgan Stanley and UBS AG for information about their hiring practices, people familiar with the matter said earlier this year. UBS last month looked into the recruitment of Joyce Wei, whose father is chairman of Tianhe Chemicals, and placed two bankers on leave as the bank reviewed whether they violated internal guidelines when Wei was recruited, people familiar with the matter said.
Deutsche Bank’s position in the U.S. has expanded since its 1999 acquisition of Bankers Trust Corp. for $9 billion, at the time the largest purchase of a U.S. bank by a foreign company. That’s brought the company under the oversight of regulators including the SEC and the Federal Reserve.
China, which is curtailing coal consumption in favor of cleaner energy to fight air pollution, plans to add 8.6 gigawatts of nuclear power capacity this year, the National Energy Administration said in January. That’s almost equal to the U.K.’s annual nuclear-energy capacity.
China General Nuclear operates the Daya Bay nuclear center in Shenzhen, China’s biggest by capacity, according to its website. It changed its name from China Guangdong Nuclear Power Group last April, the website shows.