Shanghai Pudong Development Bank announced Tuesday that Citibank has concluded an agreement to purchase a minority stake in the Chinese bank.
The agreement calls for Citibank Overseas Investment Corp. to pay $62.2 million for a 4.62% stake in Pudong Development, one of four listed banks in China.
In an initial deal reached late last year and unveiled this year, the Citigroup Inc. unit said it would pay about $72.5 million for a 5% stake. A rights issue offered by the Chinese bank around the time of that arrangement diluted Citibank's interest.
A spokeswoman for Citibank in Shanghai would not comment beyond Pudong Development's recent statements.
In Tuesday's announcement, the Chinese bank said that Citibank will buy 180 million nontradable shares from two state-owned holders: Shanghai State Asset Management Office and Shanghai Jiushi Group. The New York-based company will pay 37 cents a share.
Citibank has until the end of next month to complete its purchase of the stake, or the arrangement is void, Pudong Development said.
According to separate documents issued by the Chinese bank last month, Citibank has the right to buy up to 24.9% of Pudong Development between 2006 and 2008.
The U.S. bank has said it hopes the arrangement will help it to offer credit cards to Chinese consumers and lay the groundwork for further cooperation between the banks.
Citibank has done business in China since 1902 but has not established a very large toehold there, because the government has always curtailed the activities of foreign banks.
But that has not stopped Citi and its peers from trying to establish operations there. About a decade ago Citi and other U.S. companies began a genuine push in China. Last year Citi, along with some of its biggest foreign competitors, won the right to offer foreign currency transaction services to Chinese individuals and corporations.
The big opportunity may still be four years away. As a new member of the World Trade Organization, China has until 2006 to fully open its markets to foreign financial services organizations.
