According to people familiar with the matter, several Chinese banks are close to reaching an agreement to provide syndicated loans to help Boyu Investment acquire 60% of Starbucks China's retail business. Foreign banks have lost the opportunity to participate in the loan in this transaction.
They said Ping An Bank, Industrial Bank and China Minsheng Bank were negotiating with Boyu Capital for a seven-year syndicated loan amounting to approximately US$1.4 billion. They also said that specific terms are still under negotiation and the list of participating banks has not yet been finalized. The loan will be used by Boyu Investment to pay for the acquisition, as well as to serve as working capital for new joint ventures and to meet expansion needs.
Starbucks agreed this week to sell a controlling stake in its China operations to Boyu for an enterprise value of $4 billion in an effort to improve the coffee chain's sluggish operations there.
The failure of foreign banks to gain access to current financing transactions highlights the current dominance of Chinese banks in financing large-scale domestic M&A transactions.
People familiar with the matter also revealed that China Merchants Bank, which had previously been considered the most promising by market participants, also failed because the bank supported another bidding company in this transaction. Competition for syndicated loans in China is becoming increasingly fierce, and participating in high-profile transactions is increasingly strategic.
Boyu, Starbucks, Ping An Bank, Industrial Bank, Minsheng Bank and China Merchants Bank did not immediately respond to requests for comment.
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