Standard Bank deal sets record for foreign direct investment into South Africa

Robert Laing

Robert Laing

The R36,7billion that Industrial and Commercial Bank of China (ICBC) is offering for 20percent of Standard Bank sets a record for both foreign direct investment into South Africa and Chinese external investment.

ICBC's offer for a fifth of Standard trumps the R33billion Barclays paid for 60percent of Absa.

News of the deal saw the rand strengthen to R6,55 to the dollar yesterday.

When ICBC listed a year ago on the Shanghai and Hong Kong stock exchanges, it set an initial public offering record by raising $22billion.

"A quarter of the money from the biggest initial public offering ever is going into Standard Bank," group chief executive Jacko Maree said. "This is a huge vote of confidence in our country and Africa."

With a market capitalisation of $319billion, ICBC is the world's largest bank.

"It has 16800 branches, whereas we have not yet reached 1000," Maree said.

A map of the two banking groups' global footprints shows little overlap. ICBC does not have a presence in Africa or South America unlike Standard, which is establishing itself in emerging markets.

Maree said Standard was seeking Reserve Bank approval to keep a significant portion of the money from this deal offshore for global expansion.

"A problem South African corporations face is how to finance international expansion. We are demonstrating that you don't have to list in London. You can do it from here," Maree said.

Half of ICBC's stake will come from issuing new shares at R104,58 and the other half from buying existing shares for R136, a 30percent premium on the average price over the past 30 days.

The relationship with ICBC started two years ago when Standard Bank executives met their Chinese counterparts at an International Monetary Conference meeting in Beijing.

"The idea of working together was first mooted on September 10. It took just 45 days to finalise this deal. We have found ICBC chairman Jiang Jianqing and his team very straightforward to work with," Maree said.