Goldman Sachs Group Inc. (GS) is considering selling part of its 4.9% stake in Industrial & Commercial Bank of China Ltd., a move that could raise more than $1 billion, the Wall Street Journal reported Monday, citing several people familiar with the matter.
Acording to the Journal, talks between Goldman and Industrial & Commercial Bank of China about a sale started in late 2008 and include potentially divesting 15% to 20% of Goldman Sachs' stake in the Chinese bank.
Earlier this month, Industrial & Commercial Bank of China Chairman Jiang Jianqing told reporters that his bank was in talks with its strategic investors about a possible stake sale, but that a final decision hadn't been made.
Goldman Sachs paid $2.6 billion for its stake in Industrial & Commercial Bank of China in 2006. The New York-based company's stake in the Chinese bank is currently valued at about $7.5 billion.
Goldman Sachs, one of the two surviving major investment banks, finally succumbed to the impact of the ongoing global credit crisis that beset most of its rivals.
Goldman Sachs and the other surviving brokerage giant Morgan Stanley (MS) have become bank holding companies, providing them with access to the federal government's $700 billion rescue plan, allowing them to borrow at the Federal Reserve's discount window and making it easier to get stable sources of funding.
Goldman Sachs was among the first banks to receive funds as part of the $700 billion government bailout. In October last year, the company received $10 billion in capital from the U.S. government in return for preferred stock and warrants to purchase common shares.
Of late, Goldman Sachs and other U.S. financial institutions that have received government aids in recent months are in delicate position as they face stringent restrictions on executive bonuses and compensation that could hamper their normal way of carrying out their business operations. As a result, Goldman Sachs aims to repay those debts as early as possible. Off-loading the stake in Industrial & Commercial Bank of China may help Goldman Sachs repay some of that debt.
However, any transaction would have to wait until late April, when a lockup on half the stake is set to expire.
Also last week, China 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 include a requirement that trades in Chinese financial firms by foreigners must be executed on a stock exchange at prevailing market prices. In is unclear whether the new rules, which are set to take effect on May 1, would affect Goldman's possible sale.
Goldman Sachs in December reported its first quarterly loss since going public in 1999, hurt by highly disappointing results at its trading and principal investments business. Goldman Sachs reported negative net revenues of $1.58 billion for the fourth quarter, compared to positive $10.74 billion in the same quarter last year.
Goldman Sachs shares, which have traded in a range of $47.41 to $203.39 over the past year, clsoed Monday's regular trading session at $111.93, up $14.61 or 15.01% and gained an additional 17 cents in after hours trading.
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