Bank of America Merrill Lynch is selling its remaining stake in China Construction Bank Corp (CCB) for US$1.47 billion, ending an eight year-old investment that generated a paper profit more than five times the original cost.
The strategic assistance agreement (SAA) between Bank of America and CCB, which was recently extended to 2016, will continue.
The transaction is expected to generate a pre-tax gain of approximately US$750 million in the third quarter of 2013.
With that profit, its total gains from dividends and selling shares will amount to nearly US$18 billion before taxes, according to regulatory filings between 2009 and 2013.
The deal has comprised 2 billion Hong Kong-listed shares at an indicative price range of HK$5.63-HK$5.81, representing a discount of 2.0%-5.1% to the current closing of HK$5.93.
BofA has bought a 9% stake in CCB for US$3 billion in 2005 and this is the sixth time the bank has sold the shares down since the two lenders were tied together. In total, the US bank has made US$16.37 billion.
At the low end of the marketed range, Bank of America is offering its stake at a 5% discount to China Construction Bank’s closing price of US$5.93 dollars in Hong Kong. BofA’s stake represents just 0.8% of China Construction Bank.
The sale of the CCB stake also comes as BofA Merrill tries to clean up its balance sheet by selling off non-core assets.
Bank of America benefits through increased brand recognition in China and enhanced international business experience for Bank of America employees. Approximately 3,100 Bank of America employees and 5,000 CCB employees have participated in SAA exchanges since 2005.
Bank of America CEO Brian Moynihan said:"The Bank of America-CCB relationship continues to bring substantial benefits to each company. We have built a strategic partnership based on shared operational expertise, and our clients in China and Asia recognize Bank of America’s ongoing association with one of the world’s leading financial institutions."