CDB fails to land RBS aviation unit despite making highest bid
China Development Bank (CDB) made the highest bid for Royal Bank of Scotland’s aviation-leasing unit but lost out on the transaction due to concerns about its ability to close the deal. The asset was sold to Sumitomo Mitsui Financial Group (SMFG) for $7.3 billion earlier in January.
People familiar with the transaction told the Financial Times that state-owned CDB offered to pay $240 million more than SMFG. However, RBS was put off by the risk that Chinese regulators might nix the deal and the fact that CDB didn't make many visits to inspect the asset.
CDB is a policy bank, set up to provide financing for projects in which the government has an interest. It first ventured overseas as a participant in loans-for-resources deals involving state-owned oil and mining firms, but has since diversified into making direct loans to foreign governments. CDB took a 3% stake in Barclays Capital in 2007 but saw a subsequent attempt to invest in Citigroup vetoed by Beijing.
In contrast, China Investment Corp. (CIC), the sovereign wealth fund specifically set up to manage a portion of the country's foreign exchange reserves, has been an active investor in overseas companies.
RBS' rejection of CDB comes at a time of wider concerns about Chinese firms - often with state backing - taking advantage of the economic difficulties in Europe to pick up assets on the cheap. Speaking at the World Economic Forum's annual gathering in Davos last week, John Zhao, CEO of Hony Capital, argued that foreign prejudice against Chinese investment is unfair. He noted that many domestic firms are taking their first steps into international markets and are still learning the rules.
Nevertheless, Sany Heavy Industry, a Chinese construction-equipment maker, and CITIC Private Equity this week announced the purchase of German pump manufacturer Putzmeister for EUR360 million ($472 million).
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