The former CEO of Goldman Sachs, Henry M. Paulson, made about 70 trips to China during his tenure. Even as Secretary of Treasury, he is still traveling to China.
And, it's paying off big time.
It gave his company an opportunity to invest in China's mega bank IPO, Industrial & Commercial Bank of China Ltd. (ICBC). According to a report from Bloomberg, Goldman Sachs shelled out $2.6 billion for 5% of the company early this year. The profit on the deal is about $4 billion, which is the largest payday for the firm – ever.
OK, there are some major restrictions, such as that Goldman cannot sell any shares for three years. Also, there are political considerations (it would not look cool if an American investment bank started to dump shares).
But, then again, Goldman's investment is more than just making money. It should allow the firm to gear up for more investment banking business in fast-growing China.
It's also a sign that Goldman is much more than an advisory firm. It is becoming an investor. As seen recently, the firm is quite savvy at this. Look at another major deal Goldman struck in Japan, making about a $3.7 billion profit from its $1.28 billion investment in Sumitomo Mitsui Financial Group Inc.
Tom Taulli is the author of various books, including the Complete M&A Handbook and operates InvestorOffering.com.
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