Bank of America Merrill Lynch on Tuesday night sold its remaining stake in China Construction Bank, one of the "big four" banks in China, for HK$11.4 billion (US$1.47 billion).
The deal, which launched after the market close, comprised 2 billion H-shares at an indicative price range of HK$5.63-HK$5.81, representing a discount of 2.0%-5.1% to Tuesday’s closing of HK$5.93.
BofA bought a 9% stake in CCB for $3 billion in 2005 and this is the sixth time the bank has sold the shares down since the two lenders were tied together. In total, the US bank has made $16.37 billion.
The pricing was set at HK$5.70, around the middle point of the indicative guidance, translating to a discount of 3.88% to the last spot, also the highest price among the six jumbo block trades.
BofA Merrill was the sole bookrunner on the sale.
The deal’s success was partly driven by a recent rebound of the Hong Kong stock market. The Hang Seng Index closed 1% higher on Tuesday and has climbed a total 4% during the last four trading days.
The sale of the CCB stake also comes as BofA Merrill tries to clean up its balance sheet by selling off non-core assets. The US bank has to meet regulatory requirements such as the third edition of the Basel accord on international capital standards.
“Global banks sell Chinese financial companies mainly because of their own capital pressure. However, it also shows that Chinese financial firms are no longer the top priorities in their buying list,” said Hu Bin, a senior FIG analyst with global rating agency Moody’s Investor Services.
The move by BofA Merrill follows other large financial groups that have withdrawn from China’s financial sector. Goldman Sachs sold out of Industrial & Commercial Bank of China, and HSBC who was trying to sell its 15.57% stake in Ping An Insurance and a 5% stake in Bank of Shanghai.
“Bank of America still has a strategic agreement with CCB and it will extend that through 2016. So that co-operation will continue to sustain the US bank despite it not holding an equity holding in the Chinese group. They are still a very important partner for Bank of America,” said a person familiar with the situation.
However, not all US and European banks sold out their stakes in China financial industry. For example, HSBC still has a 19% stake in Bank of Communications, China’s fifth-largest bank by assets.
Three companies launched share follow-on deals on Tuesday to take advantage of the market rebound.
CJ Cheiljedang raised $276.5 million by selling shares in Samsung Life Insurance. The firm sold 3 million shares, or 1.5% of Samsung Life’s outstanding share capital, at Won101,280 each, the bottom of an indicative price range of Won101,280-Won104,445 each, representing a discount of 4% to yesterday’s close of Won105,500. There is a 90-day lock-up period on the vendor. BNP Paribas, Citigroup and HSBC were joint bookrunners.
Meanwhile, Xinyi Glass priced a top-up and secondary placement of HK$1.206 billon ($156 million). The deal involves 180 million shares or 4.6% of the enlarged share capital, including 50 million shares in an upsize option, which was fully exercised. It was priced at HK$6.70, the middle point of a guidance at HK$6.60-HK$6.80, or a discount of 5.25% to the last spot.
More than 50 accounts participated in the book with the top 10 allocations receiving 70% of the deal.
Selling shareholders are High Park Technology, Goldbo International, Goldpine, Linkall Investment, Herosmart, Full Guang and Sze Tang Hung.
There is a 90-day lock-up period on the vendors and the company. Proceeds will be used for future capital expenditures and general working capital.
Citic Securities International and CLSA are working on the transaction.
Uni-President China was also in the market selling up to $67 million shares in Want Want China, a leisure food company. The deal comprises 46.26 million shares at a guidance range of HK$10.98-HK$11.20 per share, translating to a 2%-4% discount to Want Want last closing at HK$11.44.
After the sale, Uni-President China will have no shares in Want Want, according to the term sheet.
HSBC is sole bookrunner on the transaction.