China’s Legend Holdings has announced a deal to acquire a majority stake in Banque Internationale a Luxembourg (BIL) from Qatar’s royal family for €1.48 billion (Dh6.46bn), marking the latest foray by Chinese investors into Europe’s banking sector.
The acquisition, announced late on Friday, is the largest buyout to date of a European bank by Chinese investors. The deal comes amid speculation that Qatar may trim its foreign assets to support its banking sector, which has suffered in the wake of the diplomatic and economic standoff with its Arabian Gulf neighbours.
Legend Holdings, best known as the owner of electronics firm Lenovo and Chinese private equity firm Hony Capital, will acquire the 90 per cent stake in BIL from Precision Capital, an investment vehicle owned by members of Qatar's ruling family, including former Qatari Prime Minister Sheikh Hamad bin Jassim Al Thani.
The sale comes as Qatar’s own banking sector comes under increasing pressure due to the economic and diplomatic standoff with the country’s neigbours.
The UAE, Saudi Arabia, Bahrain and Egypt on June 5 broke diplomatic ties with Qatar and cut off air, sea and land access to the country over Doha’s support for “terrorist groups aiming to destabilise the region”.
Ratings agency Moody’s cut its outlook for Qatar’s banks to negative last month, amid weakening operating conditions and continued funding pressures.
Fellow ratings agency Fitch last week said that it expected Qatar's sovereign net foreign assets to fall to 146 per cent of GDP in 2017 from 185 per cent of GDP in 2016 as the public sector, including the Qatar Investment Authority, continues to move some of its deposits into Qatar's banks, offsetting the outflow of non-resident deposits.
The Qatar Investment Authority last month reduced its shareholding in Credit Suisse Group to 4.94 percent.
The Chinese conglomerate will purchase the bank via its Hong Kong subsidiary Beyond Leap Limited, according to a statement posted on the Hong Kong stock exchange on Friday. The deal remains subject to various regulatory approvals.
“[BIL] is a well-run independent universal bank with a leading position in Luxembourg, which is well-capitalized with a solid, diversified business mix, a focused, long-term strategy, and strong corporate governance and risk management,” said Legend in a statement.
“[Legend] believes it can add value to the future business development of the Bank as a longterm shareholder. The Company sees great business opportunities in providing financial services to Chinese companies, especially those companies participating in the Belt and Road initiative.”
The acquisition comes four months after fellow Chinese conglomerate HNA increased its shareholding in Deutsche Bank, overtaking the Qatari royal family as the German bank’s largest shareholder.
Chinese president Xi JinPing launched the country’s ambitious “One Belt, One Road” initiative in 2013 with the intention of connecting China to major economies in Southeast Asia, central Asia, the Middle East and Europe.
Unveiled in 2013, the Belt and Road project is aimed at building a modern-day "Silk Road", connecting China by land and sea to Southeast Asia, Pakistan and Central Asia, and beyond to the Middle East, Europe and Africa, via infrastructure, trade and investment.
The policy has led to a slew of Chinese overseas investments; there have been over a hundred Chinese “One Belt, One Road” acquisitions so far this year, compared to 175 in the whole of last year and 134 in 2015, according to data from Thomson Reuters.
Major deals so far this year include the $11.6bn buyout in July of Singapore’s Global Logistics Properties, Asia’s largest warehouse operator, by a Chinese private equity consortium, and the acquisition of an 8 per cent stake in Adnoc’s Adco concession for $1.8bn in February.