Xinmao says Minsheng committed to fund Draka deal

By Sara Webb and Xie Heng

AMSTERDAM/BEIJING (BestGrowthStock) – Chinese group Xinmao said it had a written commitment from Minsheng Banking Corp (1988.HK: ) for its proposed 1 billion euro ($1.3 billion) offer for Dutch cablemaker Draka (DRAK.AS: ), in a move to address concerns the offer is not fully backed.

With no track record of international acquisitions, Xinmao’s attempt to snare Draka has raised questions over how it can pull off a $1 billion-plus acquisition.

“China Minsheng Banking Corp Ltd (Tianjin Branch) has confirmed in writing its commitment to Xinmao to finance the full amount of the proposed offer,” subject to certain conditions, Xinmao said in a statement on Monday.

Late on Friday, Draka said in a statement it wanted more information about the identity, ownership and financing of the little known Chinese company, which surprised the market last week when it proposed trumping an agreed 821 million euro offer from Italian company Prysmian (PRY.MI: ) to buy Draka.

Draka had already rejected a 731 million euros bid from French group Nexans (NEXS.PA: ).

One of the conditions of the financing is a final agreement between Xinmao and Draka with respect to a merger protocol, according to the statement. It was not immediately clear if that would preclude a hostile bid.

Xinmao was not immediately available for comment.

Xinmao also said it would make a further announcement within four weeks from November 22 whether or not it will apply for approval of an offer memorandum.

Minsheng was prepared to be flexible with the type of financing it provides, which might include not just a bank loan but also support from the bank’s lease financing operation, said a source close to the deal who declined to be named.

Minsheng (600016.SS: ), China’s seventh-biggest lender, was founded by 59 private enterprises in 1996, including New Hope Group founder and billionaire Liu Yonghao. It attracted investors including George Soros and Singapore state fund Temasek (TEM.UL: ) to its $3.9 billion IPO last year.

Last week, Draka said it had started talks with Xinmao, which was founded in 2000 and employs around 30,000.

Xinmao however does not have a track record of executing cross-border deals and most of its growth has come from investments in new projects or funding expansions.

The only other deal which a unit of Xinmao has done was to buy a 17 percent stake in a group company for about $6 million.

Tianjin’s city government has endorsed the bid and hinted at wider state support.

Xinmao said its bid for Draka aimed to utilize the latter’s core technologies to develop the Chinese market, which accounted for 46 percent of global demand for fiber optic cable in 2009.(Additional reporting by Zhang Shengnan; Editing by Hans Peters and Don Durfee)

Xinmao says Minsheng committed to fund Draka deal