ICBC in talks to buy forex firm travelex

ICBC in talks to buy forex firm travelex

Last Updated(Beijing Time):2007-05-08

Industrial and Commercial Bank of China(ICBC), the mainland's largest commercial lender, is in preliminary talks to take over Travelex, the privately owned operator of the world's largest airport currency-exchange network, according to sources close to the Chinese company. If the deal proceeds, it will be one of the largest overseas acquisitions for mainland banks flush with funds after their recent mega initial public share offerings.

Travelex, based in Britain, was valued at ￡1.06 billion (HK$16.5 billion) in a February 2005 deal that brought in private equity firm Apax Partners Worldwide as majority owner.
Several rounds of talks had been held in Hong Kong and Beijing since late last year, the sources said.
They also said Yang Kaisheng, the president of ICBC, and Travelex chairman and founder Lloyd Dorfman were leading the talks.
"The talks are still preliminary and there is a chance that the deal may not go ahead," one source said.
The deal would also require the partners to co-operate in expanding Travelex in the mainland.
ICBC and Travelex could not be reached yesterday because of holidays in Beijing and London. Apax did not reply to an e-mail seeking comments.
Big mainland banks are seeking opportunities to diversify their sources of revenue - currently largely coming from interest income on loans - to cushion the potential for reduced borrowing in the country if growth slows substantially.
Beijing has also prodded the banks to make overseas acquisitions in part to ease some of the pressure in a financial system bloated by the large stocks of foreign reserves. They rose 13 per cent to US$1.2 trillion in the first quarter after banks transferred home money raised from overseas listings.
China Construction Bank, the country's fourth-largest lender, in August last year agreed to pay HK$9.71 billion for Bank of America Corp's 17 branches in Hong Kong and Macau. Also last year, Bank of China, which has the largest foreign presence of any mainland lender, bought Singapore Aircraft Leasing Enterprise for US$965 million.
ICBC and Travelex are also considering partnering in some way to set up money exchange counters at mainland airports, according to sources.
"It is a good move for Chinese banks to try to operate overseas and one day they may become global financial conglomerates," said Steven Chan, an Asian banking analyst with US brokerage Bear Stearns.
Any deal with Travelex does carry risk for ICBC, considering that it has relatively little experience outside its home market. "ICBC is not a big foreign exchange bank and adding a foreign currency business will bring a much larger net open position," Mr Chan said. "If they don't hedge it well, then it could lead to big currency losses."
ICBC reported a loss of 1.3 billion yuan last year from foreign exchange and exchange products.
Travelex, with more than 700 retail branches in more than 30 countries, has had a deal with China Construction Bank since 2005 to handle its overseas money transfers. It also co-operates with the country's leading interbank card network, China UnionPay, on worldwide prepaid traveller's cheque services.
ICBC, which last year raised US$21.9 billion from the world's largest flotation, announced in January that it bought 90 per cent of a small Indonesia bank, Bank Halim Indonesia, for an undisclosed sum in its first acquisition outside Greater China.
It previously bought two Hong Kong banks, in 2000 and 2004, and now has a little more than 100 overseas outlets, less than 20 per cent of the presence of rival BOC.
Travelex reported revenue of ?526 million in 2005, a 6 per cent jump from 2004, according to its website.
It is 57 per cent owned by Apax, 28 per cent by Mr Dorfman and 7 per cent by Standard Chartered. The remainder is held by the management.