Tuesday, July 24, 2007

Current Score: China - Everything / Rest Of The World - 0


OK... so here’s a story that bears all the hallmarks of global finance circa A.D. 2007.
China Development Bank (CDB) and Singapore's Temasek Holdings have agreed to buy a 19% stake in U.K. bank Barclays. CDB and Temasek have made their bid so that Barclays can successfully buy out Dutch bank ABN Amro. And the icing on the cake? The whole deal was orchestrated by Blackstone -- the private equity powerhouse whose IPO recently raised $4.1 billion (3% of which is owned by Chinese government).
Ah, yes… massively leveraged buyouts fueled by oversized investments from sovereign wealth funds outside of the Western Hemisphere, and, of course, a touch of private equity and a public offering… 2007 in a nutshell, if a confusing one.
“These so-called ‘new sovereign wealth funds’ -- China, Singapore, Saudi Arabia, UAE -- could become the most important buyers of securities,” Chris Mayer says, trying to unpack this deal. “There are trillions of dollars of purchasing power in these funds. We’re finding out, at least, that they are interested in buying businesses. Given the amount of buying power behind these funds, they could bid up the prices for takeovers beyond already historically high prices.”

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