China Taiping Insurance Holdings, the mainland's fifth-largest insurer by market value, has agreed to acquire assets from its parent, China Taiping Insurance Group, for 10.58 billion yuan (HK$13.4 billion), as part of a restructuring plan.
China Taiping will issue no more than 862.74 million shares at HK$15.39 each to Taiping Insurance Group and its unit, China Taiping Insurance Group (HK), to settle the deal, according to a filing to the Hong Kong stock exchange yesterday.
The price represents a 24.5 per cent premium to its closing price of HK$12.36 on Friday when trading in the shares was suspended.
China Taiping's issued share capital will be raised by 50.6 per cent from 1.71 billion shares to 2.57 billion shares, in which the group will hold 68.96 per cent, from the current 53.27 per cent.
According to the framework agreement, the deal is in three tranches. China Taiping will acquire a 25.05 per cent stake in the group's life insurance unit, Taiping Life Insurance, for 7.01 billion yuan.
The second tranche includes a 38.79 per cent stake in Taiping General Insurance, a 20 per cent equity interest in Taiping Asset Management and a 4 per cent interest in Taiping Pension, worth a total of 1.87 billion yuan.
The company has also agreed to take over equity interests in the group's overseas property and casualty business in Macau, Singapore, Britain and Indonesia for 1.48 billion yuan.
Taiping Insurance Group was unlikely to seek a listing in the mainland share market, so it intended to list its assets through injecting the assets into its Hong Kong-listed arm, said Chen Xingyu, an analyst with Phillip Securities. "Injecting assets into the listed company will better reveal the value of the businesses," he said.
The asset injection would be positive for the long-term development of China Taiping as it would cover a larger variety of businesses, Chen said.
"However, it will take some time to see the performance of those new businesses, and also their synergies with China Taiping's existing businesses," he said.
Castor Pang Wai-sun, the head of research at Core Pacific-Yamaichi, said it was too early to say whether the asset injection would be positive or not. "It will depend on the profit contribution of the new businesses," he said.
But he agreed that the parent group might not need to seek a listing after the restructuring.
China Taiping announced on April 19 that its parent company's restructuring plan had received approval in principle from the Ministry of Finance and the China Insurance Regulatory Commission, while the framework agreement was subject to regulatory approval.
Trading in China Taiping shares will resume today.