International Business Machines Corp., the world's largest provider of computer services, plans to join Citigroup Inc.'s $3 billion bid for China's Guangdong Development Bank, two people involved in the decision said.
IBM may buy 5% of the bank as part of the offer the New York banking company is leading, the people said, declining to be identified before an announcement. Citigroup moved closer to winning control of Guangdong Development after starting exclusive talks last month, the people said.
The alliance may help IBM, of Armonk, N.Y., win contracts from Guangdong Development to upgrade computer systems. China's banks need to invest in information technology to improve risk management and tighten control over branches as they prepare for increased competition from global companies.
"This is more than just a financial investment giving ... [IBM] the best platform to enter into China," said Glenn Henricksen, a partner at CIF Consultants, which provides risk management and consulting services to financial companies in Asia. "IBM needs to have the capacity to argue that they know the Chinese local environment as well as anybody else."
Citigroup plans to buy 20% of Guangdong Development. Together, Citigroup and IBM would own 25% of the southern China bank, a share within the limit imposed by Chinese rules. Guangdong's provincial government has offered to sell 85% of the bank.
China Life Insurance Co., the nation's biggest insurer, and the Chinese power company State Grid Corp. each plan to purchase 20% of Guangdong Development, the people said.
Amanda Garland, IBM Asia Pacific's communications director, said the company does not "comment on rumor and speculation." Richard Tesvich, Citigroup's spokesman in Hong Kong, declined to comment, and Ai Liqun, a Guangdong Development spokeswoman, did not return calls.
