Excerpt from our Wall Street Breakfast, a one-page summary of this morning's key market-moving and stock-moving stories:
Citigroup Is Preferred Bidder for China Bank [Wall Street Journal]
Summary: Citigroup has won its bid (at $3.1b, beating Société Générale SA of France) to invest in Guangdong Development Bank (known as GDB), along with a Chinese consortium of investors, according to people familiar with the matter. Citigroup is limited by Chinese law to no more than 20% direct ownership. It plans to sell 5% of its stake to IBM. Citi's Chinese partners include State Grid Corp and China Life Insurance, each which will own 20% stakes. The Citi-led group will own 85% of the bank, with Citi seen taking control of daily operations. GDB has 501 branches across 26 cities, whereas Citi currently has only six branches. It has $48b in assets, but at the end of 2003 bad loans equaled 21.9% of its lending, according to Bloomberg. Separately, Citigroup is advising US Airways' in its $8b hostile takeover bid for Delta Air Lines. Delta is expected to emerge from bankruptcy next year. Its CEO rejected a merger proposal last month, saying Delta will operate as a standalone group. Citi will provide a financing package of $7.2b.
Related links: Media coverage: Bloomberg and Financial News Online US. Commentary: IBM and Citigroup Join Forces to Bid on Chinese Bank • China's Banking Sector Looks Better with New Law • Merger Mania Grips the Airlines • Citi Trades Lower after Q3 Earnings. Conference call transcripts: Citigroup Q3 2006.
Potentially impacted stocks and ETFs: Citigroup (NYSE:C), IBM (NYSE:IBM), US Airways (LCC), Delta Air Lines (DALRQ.PK) • Competitors: Société Générale (OTCPK:SCGLY), HSBC (HBC) • ETFs: First Trust Morningstar Div Leaders (NYSEARCA:FDL), WisdomTree High-Yielding Equity (NYSEARCA:DHS), streetTRACKS KBW Bank (NYSEARCA:KBE), Vanguard Financials (NYSEARCA:VFH)
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