Bank of Nova Scotia is scrapping its bid to buy a nearly 20-percent stake in China's Bank of Guangzhou, after signalling that it was growing increasingly frustrated with the slow progress of its efforts to close the acquisition.
Scotiabank, Canada's No. 3 lender, announced the $719 million transaction in September 2011, predicting at the time the deal would close at the end of that year.
But the process of getting a final go-ahead has dragged on, and bank officials acknowledge they underestimated the difficulty of negotiating the multiple levels of government approvals in China. Last year, they stopped forecasting when the deal might close.
On Friday, Scotia ended the pact citing "changing conditions."
"Scotiabank will continue to consider future opportunities for investment in China that are in line with our strategy and footprint in the region," said Dieter Jentsch, Scotiabank's Group Head of International Banking. "The bank also remains focused on our existing operations in the country including the recently announced Bank of Beijing Scotia Asset Management Joint Venture and 19% stake in Bank of Xi'an.
Speaking at a conference in Toronto in January, Scotiabank Chief Executive Rick Waugh suggested the bank may have to find other investments for the equity it had raised for the Guangzhou acquisition.
"We did raise the equity to pay for it, so we'd have to deal with that... We'll find a place for it if that one doesn't go, but we can't wait forever," he told the RBC Capital Markets Canadian Bank CEO Conference in Toronto.
"We're going to have to refresh our due diligence. It's been a year now," he added.
Source BNN
