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BOC drops Rothschild stake buy bid
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Bank of China (BOC), the country's third largest lender by market value, has dropped its plan to invest 236 million euros for a 20-percent stake in La Compagnie Financiere Edmond De Rothschild, after failing to obtain approval from the Chinese government before the March 31 deadline.

"We didn't receive approval from the government before the deadline. As a result, the deal became invalid automatically," BOC spokesman Wang Zhaowen said when reached by telephone.

Wang added that the BOC would continue to look for other ways to cooperate with the French financial company and that the bank currently did not have any other overseas acquisition plan.

According to Wang, BOC did not receive an explanation from the government on why its acquisition plan was denied.

BOC was forced to extend the deadline for the deal by three months from its original Dec 31 deadline, after failing to get the government nod.

The bank clinched an agreement to purchase the stake in the French financial institution in September last year, which would have made BOC the second major shareholder of the Paris-based asset manager.

Xiao Gang, chairman of BOC, told China Daily in an earlier interview that the bank was going to continue to work on overseas expansion although it would remain "very cautious" with mergers and acquisitions.

"The global financial system is far from being stabilized and overseas financial institutions are facing a lot of uncertainty. Thus, it's reasonable for the government to be prudent on Chinese banks' investment abroad," said Zhang Jing, analyst, Minzu Securities.

The Chinese government has stepped up control over domestic financial institutions' investments overseas after companies such as Ping An Insurance and China Investment Corporation suffered huge losses investing abroad.

Chinese insurer Ping An's 23.87-billion-yuan investment in Belgian-Dutch financial group Fortis subsequently lost more than 90 percent of its value.

According to BOC's statement on Sept 18, 2008 when it announced the Rothschild acquisition plan, the bank and its French partner were to start an asset-management and private-banking venture to sell Rothschild's financial products through the Chinese lender's 10,800 branches. The French firm managed 29.6 billion euros in assets at the end of 2007.

BOC posted a 59 percent decline in its fourth quarter net profit in 2008 due to huge losses over its US subprime mortgage related investments. The bank's full year net profit rose 14.4 percent to 64.4 billion yuan.

(China Daily April 3, 2009)

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