Target: China International Capital Corp.
Sponsors: KKR and TPG Capital
Seller: Morgan Stanley
Morgan Stanley received approval to sell its 34.3 percent stake in
The sale will pave the way for Morgan Stanley to move ahead with its long-awaited plan to form a joint venture with China Fortune Securities. Morgan Stanley expects to realize a pretax gain of about $700 million when the deal closes, which was expected to occur before the end of 2010.
The group buying the CICC stake also includes Government of Singapore Investment Corp Pte Ltd. and Great Eastern Life Assurance Co Ltd.
Under the agreement, KKR and TPG will each own about 10 percent of CICC, a source familiar with the situation said. The deal will give the private equity firms new opportunities for overseas growth.
Morgan Stanley has been trying to sell its stake in CICC for several years and indicated as early as 2007 its intent to form a new investment banking joint venture with China Fortune Securities.
However, since China’s securities rules forbid foreign companies from having more than one joint venture at a time in the country, Morgan Stanley had to put those plans on hold pending the sale of its CICC stake.
Morgan Stanley and China Construction Bank, together with other Chinese and international financial institutions and corporations, jointly established CICC in 1995. Morgan Stanley got the stake for just $37 million.
CICC has suffered recent problems, including a loss of market share in China. It also has suffered some high-level personnel departures and ranked just fifth in domestic initial public offerings during the first half of 2010.
Reporting by Wei Gu in Hong Kong and Jessica Hall in Philadelphia, both of Reuters; Editing by Derek Caney and Lisa Von Ahn