Anbang hangs ‘for sale’ sign over majority stake in domestic securities firm

Divestment of Shenzhen-based Century Securities expected to be worth at least US$564.67 million. Anbang owns 91.65 per cent of the operation

PUBLISHED : Tuesday, 22 May, 2018, 3:04pm
UPDATED : Thursday, 24 May, 2018, 12:32pm

Troubled Chinese insurance conglomerate Anbang is selling its majority stake in a domestic securities firm for what’s expected to be at least 3.6 billion yuan (US$564.67 million), in what will be its first major divestment after the company was taken over by the authorities following the dramatic downfall of its former chairman Wu Xiaohui.

Century Securities – a Shenzhen-based, mid-sized securities company – lost 56 million yuan in the first four months of this year. Anbang owns 91.65 per cent, according to a filing posted on China Beijing Equity Exchange on Tuesday.

Last year, it made 2 million yuan in annual profit, owned 6.7 billion yuan of assets, but had total debts worth 5.3 billion yuan, documents show.

The ownership of Century Securities has hung in abeyance, or undetermined ownership, since 2013, when its two biggest shareholders sold their stake to Anbang Group, for 1.7 billion yuan (reported at the time by Securities Times).

But the deal has never been ratified by China’s securities regulator, making Anbang unable to register as a formal shareholder, the filing said.

The filing, however, recognises the deal between Anbang and the former shareholders, while adding an official decision to dispose of the stake has now been made since the insurance giant was taken over by a “working group”, headed by China’s banking and insurance authorities.

“From the beginning of the takeover, all the functions of Anbang’s shareholder meeting, board of directors, and board of supervisors has ceased [to exist] and their powers transferred to the working group, the filing said.

The stake sale in Century also marks the first major divestment by Anbang, after the company expanded from a small property insurer to a global acquirer which snatched top landmarks, including the Waldorf Astoria Hotel in New York.

“The troubling financial issue with Anbang was always the mismatch between its short-term structured products and longer-term investment projects,” said Brock Silvers, managing director of Kaiyuan Capital, a Shanghai-based investment advisory firm.

“With Beijing and [Anbang] retail investors all waiting for repayment, look out for Anbang to methodically sell assets, especially overseas assets, wherever it can reasonably do so,” he added.

Wu Xiaohui’s reversal of fortune and the questions left unanswered

Wu Xiaohui, Anbang’s former chairman, was recently sentenced to 18 years behind bars for fraud and embezzlement worth more than US$12 billion.

Ahead of that, the Chinese government had seized control of Anbang after Wu was detained for alleged economic crimes, and stripped of all power to manage the company he claimed to own 98 per cent.

Anbang’s ex-chief sentenced to 18 years behind bars for US$12 billion fraud

The Wu case is viewed as one of Beijing’s most-dramatic moves yet in its clampdown on financial risk and corruption, stemming from excessive corporate borrowing.

Intense inspection of Anbang’s business and assets begun as soon as the working group took the helm. On May 10, Sino-Ocean Land, a state-backed property developer, agreed to buy Anbang Insurance’s equity stakes in a real estate venture in Beijing.

Sino-Ocean will contribute 100 million yuan, equal to half its registered capital to Beijing Bangbang, for half of Anbang’s equity interest, with Anbang holding onto the other 50 per cent.