The Wall Street firm had hoped to fetch bids as high as $1 billion from private equity shops and others, but instead it was presented with offers as low as $500 million, according to the South China Morning Post. Listed as potential bidders for the stake were buyout firms TPG, JC Flowers & Co. LLC and Bain Capital LLC. Although the buying power of private equity firms has been severely curtailed by the banks unwillingness to provide leverage for deals, the valuation expectations of sellers apparently still have yet to catch up.
If the auction is indeed busted, it will be the latest in a series of setbacks for Chinese financial institutions in their dealings with Wall Street. China Investment Corp. Ltd. has taken a bath on its $3 billion investment in Blackstone Group LP shortly before that firm's May 2007 IPO, as well as on a $5 billion stake it took in Morgan Stanley in December.
There was, however, a stroke of luck for China's Citic Securities Co. Ltd., which narrowly avoided seeing a $1 billion investment in the ill-fated Bear Stearns & Cos. wiped out. After announcing a deal to put $1 billion into Bear late last year, Citic delayed making the investment as it watched problems unfold at the Wall Street firm and canceled its plans soon after J.P. Morgan agreed to buy the troubled broker. - George White
See MarketWatch story on the auction
See Deal.com story on Citic pullout
