Goldman Sachs buys minority stake in Mongolian bank
Goldman Sachs has purchased a 4.78% stake in Trade & Development Bank of Mongolia, the country’s oldest bank. The company has previously received investment from Asian Development Bank and International Finance Corp. (IFC).
The deal was arranged by TDB Capital, Trade & Development Bank's wholly owned investment banking subsidiary, Reuters reported. The value of the transaction has not been disclosed. Goldman Sachs made the investment through GS Mongolia Investments and was represented by Sullivan & Cromwell.
The size of the stake was deliberately kept below 4.99% so as not to trigger tougher US regulatory requirements. Goldman Sachs expects to remain a passive investor and reap the returns generated by Mongolia's rapid GDP growth.
The country is attracting an increasing number of international investment banks as companies in the natural resources sector prepare to go public.
In just the last few years, Mongolia has become a hot-bed of investment banking activity, with bankers swooping into the capital city to win mandates for mining IPOs and auctions.
Erdenes Tavan Tolgoi, a state-owned coal mine operator that counts the world's largest untapped deposit of coking coal among its assets, plans to raise up to $3 billion in a multi-jurisdictional offering. BNP Paribas, Deutsche Bank, Goldman and Macquarie have been hired to handle the listing.
Mongolia's economic surge - GDP growth reached 10% in 2011, according to the Asian Development Bank - is largely a commodities story. The country is rich in copper, gold, coal and rare earths, and foreign strategic investors are studying assets with interest. On the private equity side, China Investment Corp. (CIC) committed $700 million to Iron Mining International in 2009 and then participated in two rounds of funding, together worth $600 million, for SouthGobi Energy Resources.
Several private equity firms, notably Origo Partners, have also made growth capital investments in the sector, with one eye on exits to potential Chinese strategic buyers.
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