The FINANCIAL -- "Xinjiang Hualing Industry and Trade Group, the pioneering Chinese
company, has acquired a 90 percent equity stake of JSC BasisBank from
the European Bank for Reconstruction and Development, Zurab
Tsikhistavi, Chairman of the Bank’s supervisory board as well as other
shareholders of the Bank.The amount of the acquirement is a corporate secret of the Chinese
company, but it plans to spend about USD 100 million on the Bank in the
EBRD and Zurab Tsikhistavi will retain minority equity stakes in the Bank of 5 percent each. Zurab Tsikhistavi, founder of the Bank, will remain the Chairman of the Board as well. The Board will consist of five members. One will be Mr. Tsikhistavi, one will be a representative of EBRD, and the other three will be representatives of Hualing Group.
With this move, Xinjiang Hualing which has a greatly diversified business, became the first privately-owned Chinese group to buy a foreign commercial bank in Georgia. The company has no experience in the banking sector as a company but some of its members are globally experienced bankers. This acquirement represents a significant step toward diversification and expanding business overseas, including the financial sector, for the Chinese conglomerate.
“We liked the way that BasisBank was operating, its attitude towards customers and therefore decided to acquire an equity stake in it,” claims Zhang Jun, Deputy General Manager of the Hualing Group. “The Bank will continue its current path of development. We will invest additional capital in BasisBank in regards to strengthening and promoting its sustainable growth and development.”
BasisBank is mainly oriented on micro, small and medium businesses as well as the retail segment. Under the new ownership the Bank will follow this direction as well.
“BasisBank plans to provide trade finance and settlement services as well as other products aiming to support the trade and investment activities of Chinese enterprises,” said David Tsaava, Chief Executive Officer at BasisBank. “We are not planning to open branches in China at the moment, but this process will follow the development and growth of our business.”
“BasisBank will be in a favourable and unique position to expand its client base with Chinese enterprises as well as expand the business further into Central Europe and Central Asia as an overseas financial service platform,” Mr. Jun said.
In this acquisition, Hualing Group retained Shanghai Investment Management Ltd, a boutique investment in China, as its exclusive financial advisor.
According to the Group’s representatives, Hualing Group will continue cooperation with EBRD to implement the best practices of international banking in BasisBank and the Georgian banking sector.
The partnership between EBRD and BasisBank stared early in 2007, when the Bank became the first recipient of a USD 6 million loan for lending to micro, small and medium businesses and trade finance. Later, in May 2008, EBRD acquired a 15 percent stake in BasisBank aiming to support its further development and growth, improve the Bank’s business operations and corporate governance.
“BasisBank experienced significant improvement in the Bank’s corporate governance, organizational restricting, business development, operations risk management and internal systems thanks to the support of EBRD,” Tsaava said.
“I consider these four years, the period of EBRD’s ownership of BasisBank, to have been very positive,” claims Paul-Henry Forester, EBRD Regional Director for the South Caucasus, Moldova and Belarus. “The Bank achieved great development and success during this time. But EBRD can’t remain the owner of the Bank forever as we are a financial institution and not a business organization. I think that EBRD played a significant role in the development of the Bank and we hope that its new Chinese owner will make the Bank even more successful and prominent.”
EBRD has no concrete plans at present about acquiring or selling any other Georgian banks.
Hualing Group is new in the Georgian banking sector but already has several successful businesses in Georgia. This Chinese conglomerate, established in 1988, started its business in Georgia in 2006. With USD 100 million already invested in the country, it is planning to expand total investment in Georgia to USD 500 million, including USD 300 million for a free-trade zone/industrial park near Tbilisi , plus money for the bank purchase and other investments.
“We have various businesses here in Georgia including forestry harvesting, wood processing and mining,” said Zhang Jun. “The biggest business is wood processing. Our range of activities is becoming more diversified and interesting since our becoming the owner of BasisBank.”
Hualing Group established the Free Industry Zone in Kutaisi in 2009, with ongoing construction of infrastructure facilities and installation of equipment. According to David Tsaava, BasisBank will definitely open a new branch in the new Free Industry Zone in Kutaisi.
Hualing Group is currently establishing a large scale modern commerce market and launching the Hualing International Special Economic Zone Project on Tbilisi Sea. This project is approved and supported by the Georgian Government. A groundbreaking ceremony about this was held on July 7 and the building process will continue from now for the next several years.
In General Hualing Group is a large-scale private conglomerate with more than 20 affiliated companies. Its new business BasisBank was founded in 1993. In 2011, out of the 19 commercial banks in Georgia, BasisBank ranked 11th in terms of total assets and 7th in terms of revenue.
According to National Bank of Georgia , BasisBank had assets of 154 million GEL at the end of March, compared to 159 million GEL at the end of 2011. Last year it made pre-tax profits of 3.52 million GEL, up from 2.07 million GEL in 2010.