PRAGUE (Reuters) - The Czech National Bank has issued an initial decision to reject a request by Chinese investment group CEFC to raise its stake in Czech-based privately held J&T Finance Group (JTFG) to 50 percent from 9.9 percent, a source with knowledge of the process said on Wednesday.
The source confirmed a report on the rejection by Czech news website www.echo24.cz. The website said the central bank made the initial ruling, which could be appealed, in November.
CEFC, a privately held Chinese group focused on energy and other investments abroad, has spearheaded Chinese investments in the Czech Republic, backed by political support from Czech and Chinese presidents.
It took an initial small stake in JTFG, a banking and investment group operating in the Czech Republic, Slovakia, Russia, Barbados and Croatia, in 2015.
Other regulators including the European Central Bank have approved the increase of its holding via an acquisition from JTFG founders, Slovak businessmen Ivan Jakabovic and Josef Tkac.
Website www.echo24.cz quoted what it said was the central bank decision as saying the regulator lacked sufficient information on the origin of most of the funding for the deal, or 728 million euros ($874.91 million) out of a deal value of 980.6 million euros.
“The Czech Republic’s clearance will be the last required for the deal to be closed, and CEFC actually paid around 300 million euros last year (to the sellers),” a CEFC executive with direct knowledge of the matter told Reuters.
The executive added that the company has secured the rest of the funding from Chinese banks and expected the deal to be closed soon. He did not elaborate further.
CEFC said in a statement on its website on Wednesday it was seeking Czech central bank approval of the deal and believed it had supplied all necessary documents by the end of 2017, but was ready to provide more information if required.
It did not directly confirm the central bank had made an initial negative decision, and a spokesman declined further comment.
A spokeswoman for the Czech central bank declined to comment. A spokeswoman for J&T Finance Group also declined to comment.
CEFC China Energy has emerged from a niche fuel trader to become a rapidly growing oil and finance conglomerate with assets across the world and an ambition to become one of China’s energy giants.
It agreed in September to buy a 14.16 percent stake in Russian oil major Rosneft for $9.1 billion.
Czech President Milos Zeman, who has made closer business ties with China one of his priorities, has appointed CEFC’s founder and Chairman Ye Jianming as an economic policy advisor.
CEFC’s other investments in the Czech Republic include real estate, a brewing group, a football stadium and an airline. It has also been interested in central European television stations group CME (CETV.O).
CEFC has a rare contract to store part of China’s strategic oil reserve and gained financing from the state-owned China Development Bank (CDB). It also has layers of Communist Party committees across its subsidiaries – more than at many private Chinese companies.
Reporting by Robert Muller; Writing by Jan Lopatka; Additional reporting by Chen Aizhu; Editing by David Evans and Christopher Cushing