March 16, 2012 / 9:30 AM / 7 years ago

UBS, StanChart buy China Cinda stake ahead of IPO

BEIJING (Reuters) - China Cinda Asset Management Corp said on Friday it raised 10.4 billion yuan ($1.6 billion) from four strategic investors to strengthen its business as it prepares for a future share offering on domestic and foreign stock markets.

Cinda said UBS UBSN.VX, Standard Chartered (STAN.L) (2888.HK), CITIC Capital and the National Social Security Fund, China’s biggest pension fund, would own 16.5 percent of its equity after the investment. The stake sale values Cinda at almost $10 billion.

Bank of America Merrill Lynch (BAC.N) was sole financial adviser to Cinda, according to a source involved in the transaction who was not authorized to speak publicly on the matter.

Cinda is one of four giant asset managers set up by China in 1999 to remove an estimated 1.4 trillion yuan worth of bad loans from China’s top four lenders in one of the world’s largest bank bailouts.

Each asset manager was assigned to one bank to take over all its bad debt. Cinda was assigned to China Construction Bank (0939.HK) (601939.SS). The other three asset managers are Orient Asset Management, Great Wall Asset Management and Huarong Asset Management.

“We will be listed at the right time in future. Preparation is underway, but there is no firm timeline,” said Zhang Weidong, a board secretary at Cinda.

Cinda’s listing plan is in line with ambitions of China’s four bad loan managers to move beyond repackaging and selling bad debt to become fully-fledged financial services firms.

Their transformation has been slow, in part because analysts suspect they have recovered or sold less than half of the bad debt they bought in 1999.

Zhang said Cinda’s new investors would help the firm build its asset and wealth management, investment banking, financing and financial leasing businesses.

The company had 172.4 billion yuan in assets at the end of 2011 and posted net profit of 6.38 billion yuan last year, according to a statement.

The National Social Security Fund was Cinda’s biggest investor this time, buying an 8 percent stake for 5 billion yuan. Cinda said all four new investors are barred from selling their stakes in the next three years.

Cinda issued new shares as part of the deal. The asset manager said China’s Ministry of Finance remains its biggest shareholder and its stake was not diluted.

Aside from China Construction Bank, the other top Chinese banks are Industrial and Commercial Bank of China (1398.HK) (601398.SS) and Agricultural Bank of China (1288.HK) (601288.SS).

($1 = 6.3300 Chinese yuan)

Reporting by Shen Yan and Koh Gui Qing; Additional reporting by Elzio Barreto in HONG KONG; Editing by Matt Driskill

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