Goldman Sachs Group Inc. (GS), Wednesday said it agreed to a new lock-up agreement with regard to its investment in the Industrial and Commercial Bank of China Ltd., under which Goldman Sachs will not sell at least 80% of its stake in ICBC, at any time prior to April 28, 2010. Goldman Sachs' investment in the ICBC represents approximately 4.93% of ICBC's total outstanding shares. American Express Co. (AXP), holding around 0.38% stake in ICBC, separately said it may sell its stake at some point upon expiry of the lock-up period on April 28, 2009 and October 20, 2009.
Under the existing lock-up agreement, ICBC shares held by Goldman Sachs would also become free in equal installments on April 28, 2009 and October 20, 2009. ICBC and Goldman Sachs have also reaffirmed that they will continue collaborative efforts under the existing terms of the January 2006 Strategic Cooperation Agreement.
In 2006, Goldman Sachs paid US$2.6 billion for its ICBC stake, which is currently valued at about $7.5 billion.
Meanwhile, American Express said it was geared up for the potential sale of ICBC shares held by it, while reaffirming its strategic relationship with the Industrial and Commercial Bank of China. American Express also said it would explore all potential methods of sale that would maximize value and minimize market impact, with a preference for a private sale to investors.
Wall Street Journal, in its reports published on March 24, 2009, speculated a possible sale of Goldman Sachs' 4.9% stake in the ICBC, with a view to raise more than $1 billion. Bloomberg, quoting undisclosed sources related to the matter, however, reported that the Goldman Sachs had no immediate plans to sell it stake.
Earlier this month, ICBC Chairman Jiang Jianqing had told reporters that his bank was in talks with its strategic investors, including Goldman Sachs, about a possible stake sale, but that a final decision has not been made.
Responding over the current deal with Goldman Sachs, Jiang Jianqing said, We are delighted that Goldman Sachs will remain a major strategic investor in ICBC. Our relationship over the past three years has proven very successful and we look forward to continued close cooperation between our two firms.
While providing the new-lock up deal, Goldman Sachs also said if it pursues a sale of the remaining 20% ICBC shares, all potential methods of sale that would maximize value and minimize market impact would be explored, with a preference for a private sale to investors.
Hurt by highly disappointing results at trading and principal investment business, Goldman Sachs in December, reported its first quarterly loss since going public in 1999. The bank reported negative net revenues of $1.58 billion for the fourth quarter, compared to positive $10.74 billion in the same quarter a year ago.
Even though, Goldman Sachs mulled over selling its stake in ICBC as media reports suggested earlier, it would not have been that easy, as Chinese government made it more difficult for foreign institutions to buy or sell blocks of stock in Chinese financial firms, citing a need to protect national assets. The new rules, which are set to take effect on May 1, include a requirement of trade in Chinese financial firms by foreigners must be executed on a stock exchange at prevailing market prices.
Goldman Sachs was one of the first banks to receive funds as part of the $700 billion government bailout plan. However, according to recent reports, Goldman Sachs is prepared to repay the $10 billion it received in October last year, as part of the Troubled Asset Relief Program.
Goldman Sachs and other financial institutions that are recipients of government aid in recent months, find themselves in delicate position where they face stringent government restrictions on executive bonuses and compensation that could hinder their business operations. Reports also suggest that Goldman Sachs may not be allowed to make the repayment at least until the Treasury completes the stress tests that are expected to be over next month.
GS is currently trading at $109.75, down $0.83 or 0.74%, on a volume of 14.21 million shares on the NYSE. In the last 52-week period, the stock traded in the range of $47.41 to $203.39, with a three-month average volume of 24.50 million shares.
AXP is currently trading at $14.14, up $0.25 or 1.80%, on a volume of 10.15 million shares. In the last 52-week period, the stock traded in the range of $9.71 to $52.63, on a three-month average volume of 22.67 million shares.
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