ABN AMRO expansion in China
Strategy613 was appointed as advisor to ABN AMRO’s CEO for Asia in relations to the bank’s expansion into China.
Strategy613 worked with ABN in selecting the most suitable model for expansion, including which regions to prioritise. We were actively involved in introducing ABN AMRO to central and regional government officials, engaged national and regional banks on partnership ideas, and helped shape the bank’s strategy of choosing to acquire a mid-sized regional bank.
Kasikornbank’s unique partnership with Minsheng Bank
Kasikornbank (KBank) is one of the leading banks in Thailand, but did not have a meaningful presence in China. Strategy613 was hired as China Advisor to Kasikornbank’s CEO in 2002 to help develop the bank’s China business.
We helped KBank in a range of activities: developed capacity to service Chinese clients in Thailand, established a relationship fabric in China, expanded the existing product line (research, retail, credit card JV with China’s Union Pay), targeted public relations campaign (annual seminars, Olympics, selected sponsoring initiatives) and obtained for KBank all the necessary licenses from the banking regulators. Strategy613 also advised on identifying the bank’s business niche in China: SME lending.
KBank wanted to pursue this strategy in partnership with a leading Chinese bank, but did not want to acquire a stake in that bank, as is usually required. Reluctance by local banks to lend to SMEs coupled with the Government’s agenda to support SMEs as a means to boost employment meant that KBank was given much more leeway than would usually be accorded a foreign institution.
Strategy613 structured and executed the joint venture with one of the top local institutions, Minsheng Bank.
Makro turnaround and sale to Lotte Group of Korea
Makro was the first foreign retailer to be granted a license to operate a cash-and-carry business in China (1997). Their three local partners were handpicked by then Commerce Minister, and were among the biggest State Owned Enterprises (SOEs). Yet 7 years on, they were losing money and had only four stores in operation – Makro’s management contract was on the line.
In 2004, Strategy613 was engaged by SHV Group, the owners of the global Makro franchise to turnaround the company.
Once the operations had re-gained the confidence of the local partners, Strategy613 recommended streamlining of the shareholders on the Chinese side whereby COFCO would acquire the other Chinese owned stakes and control 51% of Makro China by acquiring the other partner’s stake at a valuation of RMB 450 million in early 2007.
Having been credited with turning Makro China into a profitable outfit with two major shareholders, we were appointed to arrange the sale of Makro later that year. In addition to the potentially conflicting interests of the shareholders, there were added complexities of selling a foreign-SOE joint venture, as well as structuring difficulties such as having to hold public auctions at the Beijing Equity Exchange for COFCO’s stake. We worked on this transaction for nine months and sought out over thirty potential buyers. Finally in January 2008, Lotte Group of Korea won the bid at a valuation of RMB 1,250 million. The value represented almost three times the value COFCO paid for Chinatex’s stake one year earlier and about 180 times the LTM earnings at the time of pricing.
Thai Retail Entry into China
In 2004, the Thai Ministry of Industry mandated Strategy613 to help Thai fashion designers enter the Chinese market.
Strategy613 designed a specific market-entry strategy for each industry segment, supported by a 300 page research document on Chinese market trends. We also arranged business-matching forums with buyers from various cities throughout China. The project concluded with a fashion show arranged in the Great Hall of the People - first time ever such an event took place in a China’s seat of power. The fashion show featured 100 models, over a dozen brands, and was attended by 600 VIPs and press.
ICBC acquisition of ACL Bank in Thailand
ICBC had been looking to acquire ACL since 2007, but the deal remained grounded due to structural and valuation issues, and difficulties of obtaining government approvals for a 49%+ foreign acquisition of a non-distressed bank.
An additional challenge was that the largest shareholder of the bank was the Ministry of Finance, who had bought 30.6% of the bank during 1997-98 financial crisis at THB11.50 per share, and the Ministry would not be able to sell its holding at less than that price, whereas the average price of ACL shares in H1 2009 was THB 3.96.
In 2009, Strategy613 was brought into the deal on behalf of the Thai government. Within months, ICBC made a public voluntary tender offer for all of ACL shares with a value of over US$ 550 million, and the deal closed with all approvals granted on both sides, in April 2010.