Ping An buys 50pc of Fortis asset manager
Enoch Yiu and Natalie Chiu
Mainland insurer makes push on to world stage with ?2.15b purchase
Ping An Insurance (Group) has made a key move to expand overseas by agreeing to pay Euro2.15 billion (HK$25.36 billion) for a 50 per cent stake in the global asset management arm of Belgian financial conglomerate Fortis.
The mainland's second-largest insurer yesterday said it had signed a memorandum of understanding with Fortis to acquire the stake in Fortis Investment Management, which has a portfolio of about Euro133 billion.
Last year, Ping An bought 4.99 per cent of Fortis.
Also yesterday, the company won board approval for a general mandate to sell new shares in Hong Kong.
The mandate, once approved by shareholders, will allow the insurer to sell new shares amounting to no more than 20 per cent of the existing H shares quoted in Hong Kong, the company said in a statement filed with the Hong Kong stock exchange, Bloomberg reports.
In the Fortis deal, it is widely believed Ping An will fund the acquisition using proceeds from its proposed issue of up to 120 billion yuan (HK$131.83 billion) in bonds and shares, which shareholders approved last month but is still pending regulatory approval.
After the acquisition, Fortis Investments will be renamed Fortis Ping An Investments to allow the mainland insurance company to step on to the world stage of asset management and to build an overseas platform for its clients under the qualified domestic institutional investor scheme.
Ping An and Fortis each will nominate five directors to the board of the joint venture while retaining the existing leadership of the asset management company.
Market watchers say the joint venture is a win-win situation, allowing the two sides to expand into each other's home market as well as leveraging on ABN Amro Asset Management, which Fortis bought in the second half of last year for Euro24 billion.
While Fortis Investments acknowledged subprime exposure of Euro23 million in collateralised debt obligations as of the end of last year, Fortis has agreed to indemnify Ping An against any impairment in the value of such assets.
The acquisition would be positive to Ping An's long-term growth, said Louis Tse, a director of VC Brokerage.
'Ping An is making the right move to acquire an overseas business as it is a step forward for it to become an international company,' Mr Tse said.
Peter Ma Mingzhe, the chairman of Ping An, said the acquisition would complete the insurer's strategy of three business focuses - insurance, banking and asset management.
'Fortis Ping An Investments would fast become an important earnings driver for Ping An, given the enormous growth in the asset management sector globally and in China in particular,' Mr Ma said.
Fortis chief executive Jean-Paul Votron said combining Fortis Investments and ABN Amro Asset Management would bring assets under management to about Euro245 billion.
The transaction is pending final agreement and regulatory approvals.
The acquisition was announced just hours after the mainland insurer reported a 140.2 per cent surge in net profit to 19.21 billion yuan for last year, having taken advantage of the booming A-share stock market.
Despite the strong growth, some analysts expressed concern over the company's outlook.
Ping An's investment income more than doubled last year to 51.74 billion yuan. Its 474.88 billion yuan investment portfolio holds 40.2 per cent in bonds, 26.8 per cent in cash, 24.7 per cent in equity and 7 per cent in term deposits.
Gross written premium and policy fees rose only 15 per cent to 80.4 billion yuan last year.
Total income surged almost 55.4 per cent to 137.05 billion yuan.
Shares of Ping An yesterday rose 2.9 per cent to close at HK$53.15.
Deal completes company's new three-pronged strategy
The amount Ping An may raise from its bond and share issue, in yuan: 120b yuan