Firm Aids Chinese Bank’s Globalization Efforts with Investment in South Africa

Goldman Sachs advises Industrial and Commercial Bank of China in its 2007 purchase of a 20 percent stake in South Africa’s Standard Bank, the biggest foreign investment yet by a Chinese bank and the largest foreign investment in South Africa since the fall of apartheid. 

In 2007, China’s largest bank, Industrial and Commercial Bank of China (ICBC), sought to extend its international reach and build an on-the-ground presence in natural resource-rich Africa. The bank accomplished this through a US$5.4 billion purchase of 20 percent of South Africa’s Standard Bank, the largest foreign investment in South Africa since the fall of apartheid. At the time, Standard Bank operated in 18 African countries and 21 others around the world, including Brazil, Argentina, and Russia.

ICBC selected Goldman Sachs to advise it on this landmark purchase after Goldman Sachs executives introduced ICBC bankers to Standard Bank’s executives at the meeting of the African Development Bank in Shanghai earlier in the year. Goldman Sachs and ICBC’s strategic relationship began in the 1990s during the first wave of Chinese privatizations and was cemented in 2006 when Goldman Sachs took a 7 percent stake in ICBC for US$2.5 billion, one of the firm’s largest equity investments at the time. Along with the infusion of capital, Goldman Sachs agreed to advise ICBC across key areas, including corporate governance, risk management, and corporate and investment banking.

For ICBC, the investment in Standard Bank meant the potential for serving the large and growing number of Chinese businesses establishing operations on the continent, and to benefit directly from the rapid pace of growth in Africa’s largest economy. The investment helped fortify Standard Bank’s capital base and lent support for the South African bank’s own international growth strategy. More broadly, the ICBC/Standard Bank deal was viewed as establishing a robust financial services gateway between Asia and Africa, linking the biggest bank in Africa and its expertise in resource financing with the biggest bank in China, the end market for those resources.

Also in 2007, Goldman Sachs advised ICBC in the purchase of a 79.93 percent stake in Macau’s third-biggest bank, Seng Heng Bank, for US$583 million, further strengthening the Chinese bank’s global expansion strategy.

 

This article was originally published as part of a series commemorating the 150th anniversary of Goldman Sachs’ founding in 1869.