BoC to buy stake in LCF Rothschild

By Scheherazade Daneshkhu and Sundeep Tucker

Published: September 18 2008 12:48 | Last updated: September 18 2008 19:58

Bank of China the world’s fifth largest bank, is to take a 20 per cent stake in La Compagnie Financière Edmond de Rothschild, the family-held asset management and private banking business.

The move signals that, in spite of the financial crisis, Chinese institutions are willing to invest in western banks.

The Shanghai and Hong Kong-listed commercial bank will pay €236.3m($341m) for the stake in the French arm of the La Compagnie Financière,which was created in 1953 by Edmond de Rothschild and has been chaired by his son Benjamin de Rothschild since 1997.

It is the first strategic investment by a leading Chinese bank in the eurozone. Thedeal will allow Rothschild to tap into a fast-growing class of wealthy Chinese, while providing Bank of China with financial services products to sell to increasingly sophisticated Chinese investors.

MichelCicurel, chief executive of LCF Edmond de Rothschild, described China as the “El Dorado” of emerging markets, with 500,000 dollar millionaires “and it’s growing fast”.

The deal has been eight months in the making and emerged from business links between the two companies three years ago.

MinZhu, Bank of China vice-president for international finance, said Bank of China was already the most international of the top Chinese banks,with almost 1,000 branches in 28 countries. But he said the focus ofthe deal was to service its customers in China rather than aim to become a “global local bank”.

Asked whether Bank of China would take advantage of problems at European or US banks, he said: “We don’t have the capacity yet.”

Mr Zhu said the Rothschild name, with a250-year banking history, and its cautious banking approach had appealed to Bank of China. But he nevertheless insisted on seeing Rothschild’s first-half audited accounts before signing the deal.

Mr Cicurel said Rothschild did not need new equity and was in robust financial health. According to the company’s website, LCF Edmond de Rothschild made a net profit of €105m in 2007.

Under the terms of the deal, Benjamin de Rothschild will retain 75 per cent of the family business and the remaining 5 per cent stake will be held by management and employees.

LCF Edmond de Roths­child manages€30bn of assets. It is also active in mergers and acquisitions services, mostly focusing on mid-cap companies in France. It has operations in Italy, Israel and China and said it was also looking toexp and in Chile and Russia.

Bank of China was advised by Bank ofChina International, Morgan Stanley and Allen & Overy. Rothschild was advised by Goldman Sachs, Société Générale and Freshfields. 

http://www.ft.com/cms/s/0/816f5f04-8574-11dd-a1ac-0000779fd18c,dwp_uuid=e8477cc4-c820-11db-b0dc-000b5df10621.html

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Bank of China buys into Rothschild bank

shanghaidaily.com

BANK of China said yesterday it will buy a 20 percent stake in La Compagnie Financiere Edmond de Rothschild for 236.3 million euros(US$340 million) and the two will develop private banking and asset-management services.

"This partnership forms part of Bank of China's global development strategy," Bank of China chairman Xiao Gang said in a statement. "We expect to further strengthen our asset management operations and product design capabilities in private banking business, and widen the product and service offerings to our clients."

Beijing-based Bank of China said it sees a promising future for private banking and other services for China's newly affluent amid rapid economic growth.

"With the rapidly growing global demand for wealth management services, private banking and asset management are becoming increasingly important parts of the Chinese financial services industry," the statement said.

Bank of China said it hoped the deal would strengthen its presence in Europe. China's top banks are among the world's largest in financial terms but inexperienced at consumer services. They have formed ties with foreign partners to introduce credit cards and other products.

Bank of China and LCFR said they also would cooperate in developing services outside China and France.

Bankof China is the country's No. 3 commercial lender by assets but has its biggest foreign exposure. It said the latest deal was the first of its kind by a Chinese bank in an economy that uses the euro currency.

The deal expands Bank of China's European ties just two months after it bought 30 percent of Swiss-based Heritage Fund Management SA in July for 60 million yuan (US$9 million).

Founded in 1953, LCFR is controlled by the Rothschild family, which has a 250-year history in European banking. LCFR says it has nearly 30 billion euros (US$45billion) under management.

LCFR chairman Benjamin de Rothschild,quoted in the Bank of China statement, said: "This agreement opens up anew era of development for La Compagnie Financiere Edmond de Rothschild in the tradition of innovation and international expansion of our group."

http://www.shanghaidaily.com/article/?id=374296&type=Business

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Bank of China is the world's fifth biggest by market value.

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