Scotiabank "can't wait forever" for Guangzhou deal-CEO

Tue Jan 8, 2013 1:05pm EST

* Scotiabank agreed to buy 20 pct stake in 2011

* Bank has faced delays, will have to refresh due diligence

* Will not "rush into anything" regarding CI stake

By Cameron French

TORONTO, Jan 8 (Reuters) - Bank of Nova Scotia signaled on Tuesday it is growing increasingly frustrated with the slow progress of its efforts to close its acquisition of a 20 percent stake in China's Bank of Guangzhou, and it opened the door to the possibility the deal might not go through.

Scotiabank, Canada's No. 3 lender, announced the C$719 million ($728.36 million) transaction in September 2011, predicting at the time the deal would close at the end of that year.

But the process of getting a final go-ahead has dragged on, and bank officials acknowledge they underestimated the difficulty of negotiating the multiple levels of government approvals in China. Last year, they stopped forecasting when the deal might close.

Speaking at a conference in Toronto, Scotiabank Chief Executive Rick Waugh suggested the bank may have to find other investments for the equity it had raised for the Guangzhou acquisition.

"We did raise the equity to pay for it, so we'd have to deal with that... We'll find a place for it if that one doesn't go, but we can't wait forever," he told the RBC Capital Markets Canadian Bank CEO Conference in Toronto.

"We're going to have to refresh our due diligence. It's been a year now," he added.

Scotiabank hoped the acquisition would give it a sizable growth platform in China's third-largest city, and complement its already large international operation spread through Latin America and Asia.

Bank of Guangzhou is primarily government-owned and is not publicly listed. Guangzhou, with a population of around 13 million, is about 120 km (75 miles) northwest of Hong Kong.

Waugh also said Scotiabank was in no rush to alter its 37 percent stake in Canadian mutual fund manager CI Financial .

Scotiabank bought the stake - currently worth about C$2.6 billion - in 2008. But the two companies have at times endured a rocky relationship, leading to speculation that Scotiabank would either sell the stake or buy out the whole company.

"It is a big position for us, so we think about it a lot. But as long as they keep performing we're not going to rush into anything," Waugh said. "Quite frankly, you can go both ways."

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