Mergers, Acquisitions and Takeovers Case Study

Citigroup's Acquisition of China's Guangdong Development Bank:Pros and Cons of Consortium based Acquisition

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Abstract:
A Citigroup-led consortium acquired 85.6% stake in Guangdong Development Bank (GDB) for RMB24.267 billion (US$3.06 billion). As per the agreement, Citigroup owned 20% stake in GDB, as did China Life and State Grid. Being the only global bank in the consortium, Citigroup would be able to implement its management policies and would also be able to dominate the consortium. But at the same time, Chinese nationalism might create a major hindrance in its operation. It might strongly affect the labour and lending policies of the bank. There might be undue pressure upon lending to State Enterprises and including Chinese people in top management, which the Citigroup would always try to avoid. In absence of co-operation from China Life and State Grid and with only 20% shareholding in the Chinese bank, it would be impossible for Citigroup to have any influence on the management policies and decisions of the company.

Pedagogical Objectives:

• To understand the role of mergers and acquisitions in the growth strategy of the banking companies.
• To understand the pros and cons of the consortium-based acquisition.
• To have a brief understanding of the Chinese banking Industry, with an emphasis on the joint-stock commercial banks.
• To understand the potential synergies of a merger of the two complementary banks.

Keywords : China, Bank, Citigroup, World Trade Organisation (WTO), Joint-stock commercial bank (JSCB), Guangdong Development Bank (GDB), Retail, Non-performing loan (NPL), China life, State Grid, Consortium, Foreign investment, Shanghai, Guangdong, IBM

Contents : 
Citigroup: The Largest Financial Services Firm
Citigroup and Its Subsidiaries
Distribution of Corporate & Investment Banking Group
Chinese Banking Sector: The Growing Importance of JSCBs
Probable Synergies
New Shareholding Pattern of Guangdong Development Bank (GDB)
Citigroup’s Presence in BRIC Economies