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Citigroup leads $3b offer to buy Chinese bank

NEW YORK -- A consortium led by Citigroup Inc. has bid $3 billion for a controlling stake in China's Guangdong Development Bank, a leading Chinese business magazine reported yesterday. If completed, the deal would be among the largest foreign investments ever in China.

Guangdong Development, a midsized lender, is considering bids from two additional suitors, the magazine said: France's Societe Generale SA and China's Ping An Insurance Co. Citigroup spokeswoman Shannon Bell declined to comment. Officials at Guangdong Development could not be reached.

Citigroup's stake could exceed the 20 percent cap the Chinese government usually imposes on foreign ownership of domestic banks, the Chinese financial magazine, Caijing, reported. It said the exception would be granted because of Guangdong Development's troubled finances. The $3 billion price tag would be twice the bank's book value, indicating the fervor with which foreign banks are going after China's burgeoning consumer market. Citigroup is mounting its bid along with local Chinese partners.

Citigroup will not have the field to itself in China. In June, Bank of America paid $3 billion for a 9 percent stake in China Construction Bank. Citigroup rival HSBC Holdings, a longtime player in China, bought a stake in insurer Ping An in 2005. Other major competitors to Citigroup for consumer and corporate business in China include Deutschebank and the Royal Bank of Scotland, parent of Citizens Financial Group.

Richard Bove, a banking analyst at Punk, Ziegel & Co. in New York, said the detailed report in the Chinese magazine suggests an agreement with Citigroup is nearly final. ''I think the deal is done," he said. ''The information coming out of China is so specific now that people aren't guessing anymore."

Bove said acquiring a large stake in Guangdong would give Citigroup a leading position among US banks in tapping into China's growing economy.

Citigroup chief Charles Prince, who took over as head of the world's largest bank in 2003, has repeatedly said the bulk of the firm's growth over the next decade will come from abroad. Citigroup operates in over 100 countries.

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