Ge invested US $100million in Shenzhen development to become the second largest shareholder
Shenzhen Development after the introduction of capital will be able to supplement core capital and issue subordinated bonds, but it is unclear whether the capital increase can be approved during the delicate period of share reform
in the afternoon of September 28, Beijing International Club Hotel. For Shenzhen Development Bank (Shenzhen Stock Exchange code: 000001, hereinafter referred to as Shenzhen Development), an agreement of strategic significance is hereby signed. General Electric Co. (hereinafter referred to as GE group or GE) will invest US $100million in Shenzhen development
this is another foreign strategic shareholder introduced by Shenzhen development since Newbridge Asia AIV III, L.P. officially took over at the end of 2004. Different from the previous time, this time, Shenzhen development introduced Ge group in the form of private placement; If approved, Ge will hold about 7.3% of the shares of Shenzhen Development after the capital increase, becoming the second largest shareholder after Xinqiao
ge purchased Shenzhen Development shares at $100million at the price of 5.2466 yuan per share, which is 47.8% higher than the original Xinqiao stock price of 3.55 yuan per share; It is far higher than the current average price of foreign investment in domestic banks, and it is also twice the premium of the current net asset price per share of Shenzhen Development Corporation of 2.51 yuan
after GE's capital injection, the core capital adequacy ratio of Shenzhen development will be increased to slightly higher than 4%. A senior executive of the company revealed to Caijing that the next step would be to quickly start issuing subordinated bonds, so that the capital adequacy ratio would reach 6%; "In the next step, we can further enrich the capital by issuing convertible bonds and introducing Chinese shareholders, so that the capital adequacy ratio can reach the standard of 8% - it won't be too long."
in addition, after Ge enters Shenzhen development, the two sides will also cooperate in the field of financial retail. Ge will use its finance company to assist Shenzhen Development in expanding its consumer finance business and transforming its retail network system
"adopting targeted raising to supplement core capital is not a temporary move or a last resort, but the best plan." A senior executive of Shenzhen Development said
before Xinqiao became a shareholder in 2004, due to the re calculation according to the requirements of the regulatory authorities, the capital adequacy ratio of Shenzhen Development plummeted to 2.3%, and the core capital adequacy ratio was only 2.32%. In August this year, Shenzhen development put forward a relatively decent semi annual report. Under the circumstances of substantial growth in profits and significant reduction in non-performing loans in the first half of the year, its capital adequacy ratio and core capital adequacy ratio were only increased to 3.14% and 3.15% respectively. Capital increase is an important mission of Xinqiao since it entered Shenzhen. Private placement, allotment of shares and issuance of subordinated bonds were once capital increase plans considered by Xinqiao management team at the same time
in May this year, a director of Shenzhen development once told Caijing that allotment and private placement are capital increase methods that Shenzhen development has deliberately considered (see "difficulties in capital increase of Shenzhen development" in the 11th issue of Caijing in 2005). By June, the domestic securities market had started the process of share reform, and the public issuance of new shares by listed companies had in fact been suspended. Therefore, private placement has become the first choice for Shenzhen development to attract investment
people familiar with the matter said that when Xinqiao really took over Shenzhen Development at the beginning of this year, there was action of directional raising. At that time, Ge took the initiative to contact and communicate with Shenzhen development, hoping to acquire some shares, and carried out detailed due diligence on the bank in the next few months. Senior executives of Shenzhen development were generally visited and investigated. However, all actions are kept secret and rarely heard by the outside world
Ge is not the only international strategic investor in favor of Shenzhen development. According to insiders, about threeorfour foreign investors have participated in the negotiations. An important reason why they are optimistic about Shenzhen development is that after Xinqiao takes over, they will have more common language with new overseas investors
insiders said that among the several capital increase schemes, private placement was the first step for a simple reason - the core capital adequacy ratio of Shenzhen development was not up to 4%, so it was not feasible to issue subordinated bonds; Compared with share allotment, directional raising is not only simple in form, but also low in cost
people who choose Ge
close to Shenzhen Development told Caijing that foreign investors have no room for negotiation in terms of price by taking shares in Shenzhen Development in the form of private placement; Shenzhen development has unified pricing for all investors in terms of protection methods, and the private placement price is set according to the pricing standard of allotment issuance, that is, 85% of the average price of Shenzhen Development A shares within 20 trading days before the signing of the targeted offering agreement
therefore, bidding is not the key to selecting private placement objects; Strength, reputation and business are the focus of Shenzhen development. Shenzhen development finally chose Ge, mainly focusing on two points
first, Ge group is the world's largest enterprise by market value, with sales of $152.4 billion in 2004; And its strength in the financial field can not be underestimated. From 2000 to 2004, the financial business revenue accounted for more than 40% of the group's total revenue
second, in the field of consumer finance, GE Capital Co., a professional finance company owned by GE group, is one of the best professional consumer finance institutions in the world. Shenzhen Development Co., Ltd. cooperates with it in retail business, which can not only obtain a lot of mature technical support, but also make up for its own shortcomings in retail business
at present, the corporate business scale of Shenzhen development is acceptable, while the retail business is relatively weak. Frank WMAN, chairman of Shenzhen development, said in an interview with Caijing in September: "Shenzhen development has high hopes for retail business. We believe that there is huge space in the mortgage market and credit card market, and we want to do something about it."
on the other hand, for GE, as early as the "new deal year" of the reform of China's state-owned commercial banks in 2004, its senior executives quietly visited the four major banks and wanted to cooperate. Ge executives have said that there are many aspects of the company's investment in China, but the financial sector has yet to be developed
it is reported that GE is confident in the performance of the new management and the future development potential of the bank after a detailed investigation of Shenzhen development. Shenzhen Development's increasingly good performance this year is also a factor that attracts Ge to invest at a high price
up to 4%
what is the most direct effect of this targeted raising of $100million on on the current deep development
"after the capital increase of $100million, the core capital adequacy ratio of the company will reach slightly higher than 4%, which meets the requirements of the regulatory authorities for banks to issue subordinated bonds. Next, we can quickly start the issuance of subordinated bonds, so that the bank's capital adequacy ratio can reach 6%." A person close to the senior management of Shenzhen Development told Caijing
the administrative measures for the issuance of subordinated bonds of commercial banks, which was implemented in June last year, stipulates that when commercial banks issue subordinated bonds in the form of public offering, their core capital impact capital adequacy ratio shall not be less than 5%; The core capital adequacy ratio of subordinated bonds issued in the form of private placement shall not be less than 4%. It can be seen that once GE's entry into senior development is approved, the latter has been qualified to privately issue subordinated bonds
in addition, according to relevant regulations, the issuance of subordinated bonds can be included in the bank's subsidiary capital, but its amount shall not exceed 50% of the core capital. Therefore, under the current situation that the core capital adequacy ratio is slightly higher than 4%, Shenzhen development can make its own capital adequacy ratio reach more than 6% by issuing subordinated bonds
"for investors, there are too few investment tools in the market at present, and the bank interest is too low, so subordinated debt will be welcomed by the market." A person from Shenzhen Development said
in a previous interview with Caijing, Newman, chairman of Shenzhen development, also said: "We have several ways to solve the problem of capital adequacy. First, the core capital will increase with the growth of profits. For every additional 200million yuan of core capital, we can issue 100million yuan of subordinated debt; if the provision reaches 100% coverage, the excess provision can be included in the subsidiary capital. At the same time, we may also use other financial instruments to finance to make up for the gap of subsidiary capital."
according to Caijing, Shenzhen development new management's "other financial instruments" other than the issuance of subordinated bonds are likely to be the issuance of convertible bonds and the introduction of new strategic investors
after this private placement to Ge, the total share capital of Shenzhen development will reach about 2.1 billion shares, the proportion of equity held by Xinqiao will be diluted to 16.6%, Ge will account for about 7.3%, and the two foreign shareholders account for about 24% of the total shares, which is close to the upper limit of 25% for foreign capital to invest in domestic financial institutions. If it is inferred from this, the next step of Shenzhen development is likely to be domestic investors
"our plan to attract investment will be promoted rapidly. Before the deadline set by the CBRC, the capital adequacy ratio of Shenzhen development will definitely reach the standard." Deep development ⑤ put the compression nut on the lower clamp ring and use the random distribution plate hand to tighten it in the clockwise direction; A person told Caijing very conservatively
suspense of share reform
nowadays, the domestic securities market is fully promoting the full circulation reform, and the regulatory department once had a guiding opinion that listed companies that have not completed the share reform should not carry out financing. However, Shenzhen development has not yet reported the share reform plan. In this case, can the targeted offering from GE be approved by the regulatory authorities
in response, a person from Shenzhen Development with a total exhibition area of 230656 square meters said that the CSRC was quite surprised by Shenzhen Development's investment in ge. By contrast, the CBRC's approval of Shenzhen development private placement may be much easier. Newman once told: "the CBRC is positive about our overall idea of targeted offering, and they believe that this is a more realistic approach at this stage."
as far as the current situation of Shenzhen development is concerned, there is really no other way to quickly replenish capital except directional raising; It is also difficult to promote the share reform by developing the decentralized ownership structure in Shenzhen
at present, the proportion of circulating shares of Shenzhen development is as high as 72.43%. Among non circulating shareholders, the cost of holding equity is also very different. Xinqiao, the largest shareholder, received 17.89% of the original sponsor shares from the original four state-owned shareholders at 3.55 yuan per share; Shenzhen CLP Investment Co., Ltd., the second largest shareholder with a shareholding of 3.2%, is the original initiator; Haitong Securities Company, the third largest shareholder with a shareholding of 1.74%, entered at the end of 2000 when it underwritten the rights issue for Shenzhen development, with a share price of about 6 yuan per share
in this case, it is not easy to balance the interests between non tradable shareholders and between non tradable shareholders and tradable shareholders in order to promote the share reform and realize full circulation
nowadays, the mainstream way to compensate circulating shareholders in the market is that non circulating shareholders give 1 to 3 shares for every 10 shares. Even if Shenzhen development adopts the most conservative consideration compensation scheme of giving 1 share for every 10 shares, the equity of Xinqiao will be further diluted to about 13%, and the shares held by GE are bound to shrink accordingly. Therefore, in the face of the share reform, the controlling position will be the two major foreign shareholders of Xinqiao and Ge have to consider
"this matter is very sensitive now." A senior executive of Shenzhen Development told Caijing, "at the time of the share reform, Shenzhen development is introducing foreign shareholders, and whether the CSRC can approve it is uncertain for the time being."
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