Ping An Insurance

Wily Thai tycoon wins battle over Ping An stake

Regulator approves HSBC's US$7.4b sale of holding in insurer after lobbying by billionaire

PUBLISHED : Friday, 01 February, 2013, 6:49pm
UPDATED : Saturday, 02 February, 2013, 11:37am

The mainland regulator has approved the sale of HSBC's remaining US$7.4 billion stake in Ping An Insurance, which had appeared to be on the brink of collapse after weeks of raging speculation.

The sale to the Charoen Pokphan Group, controlled by Thailand's richest man, will be the biggest equity purchase in China by a foreign investor.

Last night CP Group said it "has made the payment for the full purchase price to HSBC". All parties involved - including the China Insurance Regulatory Commission (CIRC) - issued brief statements confirming the deal. None of them disclosed how CP Group had funded the transaction.

Payment for the second US$7.4 billion tranche of HSBC's 15.6 per cent stake in China's second largest insurer was made in cash, HSBC and CP Group said.

The development is testimony to the political influence and resourcefulness of Thai tycoon Dhanin Chearavanont, known as Xie Guomin in China, who controls CP Group.

The deal had been in doubt after media reports last month led to speculation about who the real buyer was and how the transaction would be funded. China Development Bank (CDB), which originally agreed to fund the transaction, subsequently pulled out of the deal.

Xie, a 73-year-old Thai-Chinese billionaire, remained adamant that the deal would go ahead even after CDB withdrew.

Sources familiar with the situation said the deal was finally made possible thanks to his intense lobbying of top leaders in Beijing and his good connections in China and Thailand.

It is understood Xie even went as far as securing a letter from Thailand's frail King Bhumibol Adulyadej to back the deal. CP group pledged to be a long-term strategic investor in Ping An and help it expand into rural China.

The intriguing timing of the deal also helps as China is undergoing a major leadership reshuffle that will not be completed until March, allowing more room for Xie to manoeuvre.

CP Group, of which Xie is chairman, was among the first foreign firms to enter the mainland in 1979 - when paramount leader Deng Xiaoping started his economic reforms. The early foray reaped the company handsome rewards and helped Xie to build invaluable connections.

The Thai business mogul also offered proof to Beijing to dispel suspicions over who the real buyer was, the sources said.

But they refused to give more details because the matter was "private and confidential".

Xiao Jianhua , a low-profile but well-connected mainland dealmaker reported to be involved, denied he was behind it.

The deal is believed to have been funded by a combination of Xie's own money and loans from several Thai banks.

CP Group, which agreed to buy HSBC's entire stake in Ping An last December for US$9.4 billion, had already paid up front for about a fifth of the stake.

The deal raised eyebrows inside and outside China as it deviated from past practice in many ways. Foreign firms are normally only allowed to buy into a major mainland financial institution if they can pay for it largely with their own resources or if they bring expertise and know-how to the table.

CP Group, an agricultural conglomerate known for its frozen chicken exports and animal feed, has net assets about equal to the Ping An stake it is buying. Many questioned how it could finance the transaction.

Its poultry and animal feed arm CP Pokphand listed in Hong Kong in 1988.

The completion of the deal is set to be sealed next Thursday.


Twists and turns in HSBC sale of Ping An stake

Nov 19, 2012 HSBC plans to sell its entire stake in Ping An to bolster capital, market participants say

Dec 5 HSBC says it will sell its 15.6 per cent stake in Ping An to firms controlled by Thai conglomerate Charoen Pokphand, an insurance novice, for US$9.4 billion, giving it a net gain of US$2.6 billion

Dec 11 HSBC agrees to pay US$1.92 billion in fines to resolve a US criminal investigation into money laundering and terrorist financing

Dec 13 Sources say over half of the US$9.4 billion payment for the stake will be funded by state-owned China Development Bank

Dec 22 Caixin Century Weekly reports that secretive but well-connected financier Xiao Jianhua plays a key role in raising funds for the Ping An stake purchase; Xiao later denies this

Jan 8, 2013 China Insurance Regulatory Commission sources tell Post they are worried whether the Thai buyer can afford the Ping An stake and is a real buyer

Jan 9 Sources tell the Post Liu Hao, head of China Development Bank's Hong Kong branch has been suspended and the bank is reconsidering its decision to fund the Ping An purchase

Jan 11 Charoen Pokphand says it has the means to buy the stake and is acting entirely on its own

Jan 23 Liu Hao has been transferred back to CDB's Beijing headquarters to take up new role

Feb 1 China Insurance Regulatory Commission says it has approved the sale; HSBC says purchasers have paid the outstanding US$7.4 billion owed and completion is expected on February 7