Today saw the largest foreign investment in Africa when it was announced that The Industrial and Commercial Bank of China (ICBC) was to buy 20% of Standard Bank for R36,7bn in cash. This would be the largest foreign acquisition by a Chinese commercial bank. Many questions are already being thrown around such as, “Is this a good move for Standard Bank?”, “Who is going to benefit the most from this deal?” and “Are South African banks following the same suite of English Football teams by being taken over by foreigners?”

To answer the last question, It was ABSA first being bought by Barclays and now Standard Bank and ICBC so maybe it is following suite but we would have to wait and see if FNB or Nedbank are also going to have stakes purchased by foreign entities.

Standard Bank shares were temporarily suspended for trading today pending the announcement and after the announcement the share price jumped 6.05% to a record high of R117,70. To date, Standard Bank shares have gained 23.4% this year. Not a bad return if one had invested in Standard Bank shares in January. Standard Bank shareholders now also have a wonderful opportunity to make even greater profits as ICBC will be offering the shareholders R136 per share in order for them to complete their 20% stake purchase.

The conditions of the deal are: Standard Bank plans to issue new shares representing 11,11% of existing share capital to which ICBC will subscribe. A further 11,11% of aggregate issued ordinary share capital is to be acquired from existing ordinary shareholders at a 30% premium to the 30-trading-day volume weighted average price. This is where the current Standard Bank shareholders will have to decide whether they want to sell their shares for R136 or not. I would think that most shareholders would be willing to sell as they stand to make a big profit.

To put it into perspective, if you bought R1000 worth of Standard Bank shares in January 2007, you now stand to make about R425 profit if you accept the ICBC offer. Not a bad return at all for 10 months ‘work’.

To find out more about what Standard Bank CEO Jacko Maree had to say about this deal click here to read the Fin24.co.za article.

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