Bank of America expected to exit over half its CCB stake this week
Bank of America (BofA) is on course to sell more than half its stake in China Construction Bank (CCB) for up to $10 billion this week. A consortium of Asian and Middle East sovereign wealth funds as well as several private equity firms are in negotiations with bankers, The New York Times reported, citing two officials briefed on the talks.
BofA plans to unload at least half of its 10% holding in CCB but would sell even more for the right price, the officials added. This would appear to conflict with comments made last week by Zhang Jianguo, president of CCB, that the US lender would retain ownership of at least 5%.
BofA is free to exit most of its stake - which it valued at almost $19.6 billion in its most recent Securities and Exchange Commission filings - on August 29. However, it was reported earlier this month that the bank was struggling to find buyers for the holding. The Financial Times claimed that talks with potential buyers in the Middle East - including the Kuwait Investment Authority (KIA) and the Qatar Investment Authority (QIA) - were floundering due to concerns about forthcoming rights issues, share sales and new listings by Chinese lenders.
KIA already holds stakes in Industrial and Commercial Bank of China (ICBC) and Agricultural Bank of China (AgBank). Both are expected to launch rights issues with KIA participating, so it is wary of raising its exposure to China's banking sector still further.
BofAML sold its option to purchase shares in a CCB rights offering held last year to Temasek. But the Singaporean sovereign wealth fund is unlikely to be interested in BofA's holding, having sold off $1.2 billion of its own shares in CCB in July.
BofAML paid $3 billion for a 9.9% stake in CCB ahead of the bank's IPO in 2005. It currently holds 25.6 billion shares and 23.6 billion of them can be sold on August 29. The lockup on the remaining 2 billion shares expires in August 2012.
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