* KKR added to list of private equity bidders - source
* Taiwan's Fubon Financial bidding as well - source
* Auction for CICC stake could fetch more than $1
(Adds Fubon sourcing, details, background)
By George Chen
HONG KONG, Dec 2 Kohlberg Kravis Roberts & Co
and Fubon Financial are among the bidders for Morgan Stanley's
(MS.N) stake in Chinese investment bank CICC, people familiar
with the matter said on Wednesday, in a deal that could be
worth more than $1 billion.
Fubon (2881.TW), Taiwan's No. 5 financial conglomerate, has
made no secret about its intention to grow into China,
especially now that cross-straits relations are thawing
When CICC was founded around 14 years ago, Morgan Stanley
paid just $37 million for a 34.3 percent piece of the Chinese
bank. CICC is now one of the biggest and most successful
investment banks in China, led by Levin Zhu, the son of China's
influential former Premier Zhu Rongji.
While the stake has been profitable for Morgan Stanley, the
New York bank lacks control of management decisions at CICC.
In December 2007, Morgan Stanley signed an agreement with
China Fortune Securities, in an effort to attain a Chinese
joint venture that gave it more control over management.
Beijing bars foreign firms from having more than one
investment banking venture and limits their holdings to a third
of the total. Morgan Stanley's ability to move ahead with the
China Fortune deal has been held up by its failure so far to
sell the CICC stake.
Last year, Morgan Stanley tried to sell the stake, but the
auction failed. It recently relaunched the sale, seeking
between $1.2 billion and $1.5 billion, a separate source
previously told Reuters.
Other private equity firms that have joined the bidding
include Bain Capital and General Atlantic, sources previously
told Reuters. Two other buyout firms, TPG and J.C. Flowers, had
also expressed interest in the stake.
Bain Capital's Jonathan Zhu, one of the firm's managing
directors in Hong Kong, is a former top banker for Morgan
Stanley in Asia.
Morgan Stanley, KKR [KKR.UL] and Fubon declined to comment.
The other private equity firms have declined to comment. The
sources have asked not to be identified because they are not
allowed to speak on the record about the deal.
Any deal is likely to take several months, as the buyer of
the stake in the government-backed bank would have to meet
STRATEGIC, FINANCIAL INTEREST
For Fubon, the purchase of a CICC stake would increase its
footprint in China. Its subsidiary, Fubon Bank (Hong Kong)
(0636.HK), owns a 19.99 percent stake in China's Xiamen
Fubon's attempt at CICC comes as Taiwan and China have
pledged to open their financial markets to each other,
highlighting the improving business ties across the Taiwan
strait after the island's President Ma Ying-jeou took office
Though both sides have recently signed a financial MOU
(memorandum of understanding), investors are still waiting for
the signing of a wider trade agreement that will allow Chinese
and Taiwanese banks to buy stakes in each other.
Fubon and the private equity investors, should any of them
sign a deal, would likely want to gain more control over CICC
than what Morgan Stanley had.
There is also the possibility that CICC will go public some
day. The buyer of the 34.3 percent stake may therefore lack
control, but could see a hefty payout later if CICC follows
through with its previously stated plans to go public.
(Writing by Michael Flaherty; Editing by Ken Wills and
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