Clever move

25 October 2007 By Martin Hutchinson

Its purchase of a 20% stake in Standard Bank is an excellent move. For only 14 times earnings, it gets unique access to a wellplaced source of finance for the rapidly increasing trade between China and Africa, which is becoming important economically as well as strategically.

This content is for Subscribers only

Context News

The Industrial and Commercial Bank of China has agreed to buy 20% of Standard Bank, the largest bank in Africa by assets. ICBC will pay 36.7bn rand, ($5.6bn) for its shareholding, of which 16bn rand will go to Standard Bank Group and the remaining 20.7bn to shareholders, who will be paid a 30% premium to Standard's market share price. The deal requires shareholder and regulatory approval; it is understood that the South African Reserve Bank will cap ICBC's potential future shareholding at about 25%.

Standard Bank operates in 18 African countries and 20 countries outside Africa, has $156bn in assets and 46,000 employees. Its market capitalisation of $21bn represents 12 times trailing earnings, so ICBC's average acquisition price represents just under 14 times earnings.

ChinaAfrica trade has increased more than tenfold in the last decade, to a value of $55bn in 2006, up 40% from 2005, and now represents 7% of Chinese trade, up from 1%, with China's imports from Africa modestly exceeding its exports to it. 12% of subSaharan African exports are to China. China is a major importer of oil and minerals. In return, China provides both consumer goods and infrastructure, investing in roads, ports, railway lines, telephone lines and power stations, also providing cheap credit.

Email a friend

Please complete the form below.

Required fields *