HSBC Holdings, Europe’s biggest bank by market value, agreed to sell its stake in China’s Ping An Insurance (Group) Co. to Charoen Pokphand Group Co. for US$9.4 billion in its biggest divestment in at least 17 years.
The sale of the entire 15.6 per cent stake in China’s second-largest insurer is equivalent to HK$59 a share, HSBC said in a statement. That represents a 2.3 per cent premium over Ping An’s closing price on Tuesday in Hong Kong trading.
China’s insurance market expanded an average 19 per cent a year in the past decade to become the world’s sixth biggest, while insurers’ assets jumped tenfold, according to the industry watchdog.
The sale, HSBC’s largest since at least 1995, would leave it with more than US$10 billion of stakes in Chinese banks even as chief executive Stuart Gulliver sells insurance operations across Asia.
“The stake sale comes at a good time for HSBC,” said Sandy Mehta, the Hong Kong-based chief executive officer of Value Investment Principals Ltd., said. “Any moves in which banks are realising and cashing in on investment gains and augmenting their capital position is sound strategy, given global uncertainties and ongoing regulatory and capital pressures banks are facing.”
Charoen Pokphand is buying the shares through three indirect wholly owned units, HSBC said. The Thai company is controlled by billionaire Dhanin Chearavanont.
“This transaction represents further progress in the execution of the group’s strategy,” Gulliver said. “China remains a key market for the group,” he said, adding that HSBC will build its strategic partnership with Bank of Communications Co.
Ping An chairman Peter Ma has overseen the expansion of the company into the world’s third-largest insurer by market value since he founded it in the southern Chinese city of Shenzhen 24 years ago. The group also has banking, securities and money management operations.
China’s insurance market expanded an average 19 per cent a year in the past decade to become the world’s sixth biggest, while insurers’ assets jumped tenfold, according to the China Insurance Regulatory Commission. Premiums income slid 1.3 per cent in 2011 as regulators tightened rules on selling coverage over bank counters and insurers adjusted their product mix to improve profitability.