April 18, 2024

DealBook: Chinese Sovereign Wealth Fund to Buy Stake in Heathrow Airport

LONDON – China’s sovereign wealth fund announced on Thursday that it would buy a 10 percent stake in Heathrow Airport near London for $727 million from the Spanish infrastructure company Ferrovial and other investors.

Ferrovial, which currently owns almost 50 percent of the British airport, has been moving to reduce its debt burden by selling assets like its Heathrow holdings.

In August, Qatar Holding, the sovereign wealth fund of Qatar, agreed to buy a 20 percent stake in the British airport for $1.4 billion. The private equity firm Alinda Capital Partners also acquired a 6 percent holding in the airport for around $440 million last year.

“This sale of a stake in Heathrow Airport Holdings is a further part of Ferrovial’s investment diversification strategy,” the Spanish company’s chief executive, Íñigo Meirás, said on Wednesday.

Under the terms of the deal, the China Investment Corporation, the country’s sovereign wealth fund, will buy a 5.7 percent stake in the holding company that owns Heathrow Airport from Ferrovial for £257.4 million ($416 million). The wealth fund will also acquire a 4.3 percent holding from other shareholders in Heathrow’s parent company, FGP Topco, for £192.6 million.

Article source: http://dealbook.nytimes.com/2012/11/01/chinese-sovereign-wealth-fund-to-buy-stake-in-heathrow-airport/?partner=rss&emc=rss

DealBook: China Investment Corp. in Talks for Alibaba Stake

Alibaba's headquarters outside Hangzhou, China.Nelson Ching/Bloomberg NewsAlibaba’s headquarters outside Hangzhou, China.

The China Investment Corporation is in advanced talks to pour as much as $2 billion into the Alibaba Group to help finance the Internet company’s efforts to buy back a stake from Yahoo, a person briefed on the matter said on Thursday.

C.I.C., a $200 billion Chinese sovereign wealth fund, is one of several potential partners from whom Alibaba would raise money to pay for the stake repurchase. On Sunday, Alibaba announced a long-awaited deal to buy back half of Yahoo’s 40 percent stake in the company for $7.1 billion.

To finance the purchase, Alibaba is raising about $4.6 billion in total. The Chinese Internet company is holding talks with a number of other firms, including Temasek, a Singaporean sovereign fund; DST Global, the Russian investment firm; and the Blackstone Group, according to people briefed on the discussions.

The pact with Yahoo values Alibaba at about $35 billion, though that figure could rise if the Chinese company is able to raise financing at a higher valuation.

Over the last several years, Alibaba has undertaken a number of moves that could lead to a transformation of the Chinese Internet giant, including an initial public offering down the road. On Thursday, Alibaba was finalizing the takeover of its publicly traded subsidiary, Alibaba.com.

Jack Ma, chief of Alibaba Group.Chinafotopress/Getty ImagesJack Ma, chief of Alibaba Group.

But the biggest move has been securing an agreement with Yahoo over the stake repurchase, beginning the unwinding of an often tense partnership.

Yahoo’s investment in Alibaba in 2005 helped the Chinese company become a premier Internet and e-commerce player in that country, but the two have clashed over a number of matters. Perhaps the bitterest conflict began in 2010, when Alibaba decided to spin off Alipay, its online payment business. Yahoo protested that it was not properly consulted before the move, setting up a battle that was resolved only last summer.

Several years ago, Alibaba sought to buy back some of the stake Yahoo held, but the American company backed out late in the process. The abrupt end to the discussions was said to rankle Jack Ma, Alibaba’s chief executive, who felt that the break had hurt his relationships with companies that had agreed to back that first repurchase agreement.

The two resumed talks late last year, hoping to reach a deal on a complicated transaction known as a cash-rich split, which would have amounted to a tax-free asset swap. But those talks ran aground earlier this year over a number of concerns, including breakup fees and the valuation of Alibaba..

The two tried again in March, aiming for a simpler deal in which the Chinese company would buy back some of its stake directly. Talks between the two companies — led by Alibaba’s chief financial officer, Joe Tsai, and his Yahoo counterpart, Timothy R. Morse — proceeded smoothly in the final attempt at negotiations, with many details being decided fairly quickly.

It appears that a new détente has emerged between the two. Yahoo, for instance, has agreed to give up certain voting powers and an ability to name a second director to Alibaba’s board as part of the stake repurchase agreement announced on Sunday.

That may help allay concerns by Chinese regulators that Alibaba is controlled by foreign investors, worries the company has been keen to eliminate.

News of Alibaba’s talks with C.I.C. was reported earlier by Reuters.

Article source: http://dealbook.nytimes.com/2012/05/24/china-investment-corp-in-talks-for-alibaba-stake/?partner=rss&emc=rss

DealBook: China’s Wealth Fund Buys Stake in British Utility

Workers for Thames Water Utilities repaired a leak on London's Oxford Street on Friday.Simon Dawson/Bloomberg NewsWorkers for Thames Water Utilities repaired a leak on London’s Oxford Street on Friday.

6:38 p.m. | Updated

LONDON — The China Investment Corporation, the country’s sovereign wealth fund, announced Friday that it had acquired an 8.68 percent stake in Thames Water, Britain’s largest water and sewerage company.

This is the first investment in Britain by the China Investment Corporation, which was created in 2007 and has $410 billion of assets under management as of 2010, the latest figures available. The sovereign wealth fund was established to invest the proceeds from China’s foreign currency reserves, which total more than $3 trillion.

The value of the deal was not disclosed, but it was welcomed by George Osborne, Britain’s chancellor of the Exchequer.

“It is a vote of confidence in Britain as a place to invest and do business,” Mr. Osborne said in a statement. “This investment is good news for both the British and Chinese economies.”

The announcement follows a recent trip by Mr. Osborne to China in an effort to increase trade between the two countries. British officials announced Friday the creation of a working group with the Industrial and Commercial Bank of China, the world’s largest bank by market capitalization, to promote Chinese investment in British infrastructure projects.

George Osborne, second from left, Britain's chancellor of the Exchequer, met with officials in Beijing this week.David Gray/ReutersGeorge Osborne, second from left, Britain’s chancellor of the Exchequer, met with officials in Beijing this week.

This week, Mr. Osborne said he wanted to turn London into a major foreign exchange trading center for the Chinese renminbi to benefit from faster growth in Asia, while strengthening the city’s position as a financial center after the banking crisis.

Last year, the China Investment Corporation chairman, Lou Jiwei, said the sovereign wealth fund was looking to invest in the infrastructure of developed countries, including Britain.

Thames Water, which oversees the water network in southern England, has attracted attention from sovereign wealth funds before. In December, the Abu Dhabi Investment Authority said it had acquired a 9.9 percent share of Thames Water.

The British water utility company is owned by a consortium of firms led by the Australian bank Macquarie. The group bought Thames Water, which has about 14 million customers, from the German company RWE in 2006 for £8 billion ($12.4 billion).

Article source: http://feeds.nytimes.com/click.phdo?i=e65cd82ac0c0fc6fb3655a0e2d261809

China’s Sovereign Wealth Fund Buys Shares in Major Banks

That word, disclosed by the banks late in Monday’s trading session, helped their share prices rebound somewhat on the Hong Kong stock exchange.

Chinese bank stocks have lost a third of their value so far this year, with most of the losses since August. Compared with the battered stocks of many European banks, the decline does not reflect worries about Greek bonds — Chinese banks have very few — but rather about the effects of stricter capital requirements by China’s regulators and worries about possible losses on domestic loans.

The China Banking Regulatory Commission is putting heavy pressure on banks to raise capital. The regulators want to prepare banks to meet rising international standards for capital adequacy and to strengthen the banks’ balance sheets against possible losses on big loans issued to Chinese companies and local governments during China’s economic stimulus program in 2009 and 2010.

The Agricultural Bank of China, one of the four main banks that together control two-thirds of the Chinese banking market, has already said that it intends to raise more capital next year. And investors have been watching for moves to sell shares by the other three: the Industrial and Commercial Bank of China, China Construction Bank and the Bank of China.

“One of the things depressing the share prices is that the existing public shareholders worry that they’re going to get diluted,” said Nicholas R. Lardy, a senior fellow at the Peter G. Peterson Institute for International Economics in Washington.

According to filings the four banks made with the Hong Kong stock exchange, the share purchases on Monday were made by Central Huijin, a holding company that is part of the country’s sovereign wealth fund, the China Investment Corporation. Central Huijin has a tangled history that has complicated China’s ability to regulate its banks.

Central Huijin already owns stakes in the banks that range from 35.4 percent of Industrial and Commercial Bank to 67.6 percent of the Bank of China. The purchases Monday will not alter these percentages significantly.

The central bank set up Central Huijin in 2003 to bail out the country’s banks after a surge in losses on loans issued to politically connected, state-owned enterprises in the mid-1990s.

Central Huijin was transferred in 2007 to the China Investment Corporation, which had been set up to invest part of the country’s foreign exchange reserves in the stock market. The move was controversial, in part because it involved issuance of bonds to compensate the central bank for the transfer. China Investment promised that it would collect enough dividends from the banks to make payments on the bonds.

As a result of that promise, the big Chinese banks have been paying out roughly half of their earnings in dividends since then, compared with only 10 to 12 percent for many industrial companies. That has slowed the banks’ ability to comply with regulators’ demands to build capital reserves.

The high dividend payouts, in conflict with the need to raise capital, have started to prompt grumbling by Chinese bank executives. Xiang Junbo, the chairman of the Agricultural Bank of China, was quoted in July by The Study Times, a weekly publication controlled by the Communist Party School, as saying that the country’s big banks “should avoid high levels of dividend payments while we are frequently going to the market for fund-raising exercises.”

But Lou Jiwei, the chairman of the China Investment Corporation, has said that Central Huijin needs 300 million renminbi a day, or $47 million, just to pay the interest on the bonds issued to compensate the central bank. Central Huijin cannot easily sell its shares in the banks to raise money for servicing that debt, because this would increase the number of shares in public circulation and could further depress the stock prices.

The announcements by the big four banks reversed a slide in their share prices earlier in the day. They posted small gains by the close, except for China Construction Bank; it fell 0.21 percent on the day, closing at 4.83 Hong Kong dollars, but was up from earlier lows.

Another worry for the banks lies in their exposure to special borrowing units of local governments. China’s National Audit Office said at the end of June that those loans — mainly for infrastructure projects that helped China spend its way out of the global economic downturn — had totaled 10.7 trillion renminbi, or $1.7 trillion, by the end of 2010.

The debt burden from those loans is putting heavy pressure on local governments to raise the fees for water, sewage and other municipal services that were greatly improved with the loans, but which continue to be provided to the public for less than their cost, Mr. Lardy, of the Peterson Institute, said.

Article source: http://feeds.nytimes.com/click.phdo?i=38aa7018651d9b50f96045993c925c2d