Standard Bank Group (Standard Bank or the Group) and the Industrial and Commercial Bank of China (ICBC) have entered into a sale and purchase agreement in terms of which ICBC will acquire a controlling interest in Standard Bank's London-based Global Markets business.
ICBC will acquire, for cash, 60% of Standard Bank Plc, the Group's UK subsidiary and the primary legal entity used by this business, and its other international operations. The proposed transaction requires the implementation of a series of steps to constitute Standard Bank Plc as the platform for a focused Global Markets business. The Global Markets business which is the subject of the proposed transaction includes commodities, fixed income, currencies, credit and equities products, and operations in New York, Dubai, Singapore, Shanghai, Hong Kong and Tokyo.
Standard Bank's other activities conducted outside Africa, comprising Investment Banking, Transactional Products and Services, Corporate Banking and Services Unit, are not part of the deal and will be transferred into new, wholly owned legal entities in London, New York, Dubai and Hong Kong. Sao Paolo, Beijing and the Offshore businesses are also not part of the deal.
The purchase price will be determined as 60% of the audited net asset value of Standard Bank Plc at the completion date of the transaction less USD80million. Based on the net asset value of Standard Bank Plc and other relevant operations as at the end of June 2013, the consideration for this transaction is estimated to be USD765million.ICBC will be granted a five-year option to purchase a further 20% of the outstanding ordinary shares of Standard Bank Plc, which option is exercisable from the second anniversary of the date of completion. Standard Bank will have a put option, exercisable after ICBC's option is exercised, to sell its residual shareholding in Standard Bank Plc to ICBC for cash.
The transaction presents an opportunity to realise proceeds on disposal that will release a significant amount of capital for the Group from its operations outside Africa, which can be effectively deployed in furthering the Group's growth strategy in South Africa and across the African continent.
Completion of the transaction is subject to regulatory approvals in multiple jurisdictions, including the South African Reserve Bank. Under the listings requirements of the JSE, the transaction requires the approval of the shareholders of Standard Bank, which will be sought at a shareholders' meeting, expected to be held in March 2014.Ben Kruger, Chief Executive of Standard Bank Group said: "We are excited about the prospects of deepening and extending our cooperation with ICBC through the global markets platform that we have built outside Africa. The strength and reach of ICBC, our strategic partners, will open a wide range of new business opportunities for the global markets business, while continuing to serve Standard Bank's African clients as their economies continue to grow and develop."Mr Jianqing Jiang, the chairman of ICBC, stated: "The large amount of commodities trading and the consequential needs for hedging resulting from the development of the Chinese economy, as well as financial reforms such as the deregulation of interest rates and foreign exchange rates, along with the two-way opening-up of capital markets, have posed new demands for the transformation of the service capabilities and business model of Chinese banks. By leveraging Standard Bank Plc's global markets business platform, mature business model, and industrial expertise, this transaction will elevate ICBC's global markets capabilities in business development, risk management, operations, and innovation in order to better serve our clients' needs.
"With the advantageous strength and resources of the shareholders, the joint venture will continue to enhance risk management and compliance practice. On this basis, the joint venture will steadily develop current businesses while exploring new business opportunities with high growth potential. Serving both ICBC and Standard Bank's clients, as well as Chinese clients' needs in global commodities, foreign exchange, interest rates, credit, equity and risk hedging service, I believe the joint venture will become a financial markets business platform that will satisfy both parent shareholders' strategies.
"David Munro, Chief Executive, Standard Bank Corporate and Investment Banking said: "China is the world's largest consumer of natural resources, its corporations and financial institutions are expanding rapidly beyond its borders, and it benefits from robust economic growth. It is also the world's second largest economy and has one of the fastest growing traded currencies in the world, the Renminbi. In combination with the powerful client relationships that ICBC has, these present the existing business with exciting franchise and revenue growth opportunities, while maintaining the role it performs for Standard Bank's African business. The partnership reflects the fact that the direct linkages between emerging market economies generally, and China and Africa in particular, are increasingly important contributors to the global economy.
"Standard Bank Plc and its subsidiaries will be renamed on completion of the transaction to reflect their joint ownership. For more on Standard Bank Group's structure visit: www.standardbank.com/The Group At AGlance .
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