Temasek and RRJ Capital to invest HK$13.6b in ING unit
Temasek and RRJ Capital target growth markets in Europe with stake deals in Dutch group's insurance unit that is expected to be spun off
Temasek, a Singaporean sovereign wealth firm, and RRJ Capital, an Asian investment house, will invest €1.27 billion (HK$13.6 billion) in a subsidiary of Dutch financial conglomerate ING.
"We are very pleased to invest in NN. This reflects our confidence in the long-term prospects of the company," said Charles Ong, a co-chief executive and co-chairman of RRJ.
A Temasek spokesman said: "NN is an insurance and investment management group with a leading position in the Netherlands. It offers exposure to both growth and mature markets in central, eastern and the rest of Europe."
Charles Ong is a former senior managing director of Temasek. His brother, Richard, is the founding chairman and chief executive of RRJ and was previously a Goldman Sachs banker as well as a founding partner of Hopu Investment Management, a China-focused private equity firm.
RRJ will buy €661.7 million of subordinated convertible notes from ING, while Temasek and wholly owned SeaTown will subscribe for €463.3 million of the notes, according to an ING statement.
By 2016, the notes will be converted into equity stakes in NN, which has Japanese and European insurance and investment management operations.
In addition, RRJ will invest €88 million while Temasek and SeaTown will spend €62 million on equity stakes in NN.
"We are delighted with the commitment of RRJ, Temasek and SeaTown to make these substantial investments in NN ahead of the intended [initial public offering]," said Ralph Hamers, the chief executive of ING.
NN is preparing to be spun off as an independent company this year, "depending on market conditions", said an ING spokeswoman, who declined to give the listing venue.
"It will be a large IPO," said a source, declining to give a figure.
Under the terms of the agreement, Temasek and RRJ's investment in NN will be revoked if the share offering is not held this year.
After the notes are converted in 2016, the total stake of Temasek and RRJ in NN would be less than 10 per cent, the source said. Neither Temasek nor RRJ would take a board seat in NN.
In the short term, NN would focus on Europe, but might later expand in Asia including China, the source said.
"If NN wants to go to other Asian countries [besides Japan], we can be their partners. The investment thesis is betting on recovering European economies in the next few years," the source said.
In March, Moody's Investors Service gave NN a Baa2 issuer rating with a negative outlook to reflect continued uncertainty about the company's financial leverage and pressures on earnings resulting from weak historical profitability.
Baa2 is an investment grade with moderate credit risk.
During the global financial crisis in 2008, ING received a US$13 billion bailout from the Dutch government. As part of its agreement with the European Commission, ING had to divest its global insurance business, its US operations and its asset management operations.
UBS was sole financial adviser to RRJ and SeaTown in this deal.