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The Ping An Insurance (Group) Company of China said yesterday its shareholder HSBC Insurance Holding Ltd has reached agreements with another two shareholders to buy another 9.9 percent stake.
HSBC Insurance, a subsidiary of HSBC Holdings Plc, will pay HK$8.1 billion (US$1.1 billion) for the shares, which will bring its total equity investment in Ping An to 19.9 percent.
Under the terms of the agreements, the acquisition price will be HK$13.2 (US$1.69) per share, a 9 percent premium to the price at which Ping An shares closed on the Hong Kong Stock Exchange on Friday.
The sellers are the private equity arm of the Goldman Sachs Group, Inc and MSCP/PA Holding Limited, an entity controlled by funds managed by the private equity arm of Morgan Stanley. Their combined interest is currently equal to approximately 10.1 percent of Ping An's issued share capital.
The deal is subject to regulatory approval by the China Insurance Regulatory Commission (CIRC) and other regulators. Current Chinese regulations require a foreign insurer to seek regulatory approval when its equity investment in a Chinese insurer exceeds 10 percent.
"We will act in accordance with the regulations," said a CIRC official, who declined to elaborate.
"Since their equity investment in 1994, Goldman Sachs and Morgan Stanley have played a very important role in Ping An's establishment of international standards. They have also enjoyed good investment returns," said Ma Mingzhe, chairman and chief executive officer of Ping An.
"We are very grateful for their assistance and support and respect their decision in this transaction," he added.
David Liu, Managing Director and Co-head of Morgan Stanley Private Equity Asia, said:"Morgan Stanley is proud to have been part of Ping An's growth and development over the past 11 years. This has been a very successful investment for us and we appreciate the hard work and the value created by all of Ping An's management and employees."
The increased spending in one of the most promising Chinese insurers reflects buyer's confidence in the local insurance industry, analysts say. HSBC has been expanding its investment in the banking, insurance and fund management sectors in recent years.
"We are optimistic about the long-term prospects of the insurance industry in the Chinese mainland and believe Ping An is well positioned to benefit from the sector's development," said John Bond, chairman of HSBC Holdings plc.
China's insurance industry has witnessed a 20 percent annual growth over the past 20 years.
Ping An stands as the second-largest life insurer and third-largest property and casualty insurer in China.
Its net profits rose by 34.3 percent from 2003 to 3.1 billion yuan (US$373 million) last year.
(China Daily May 10, 2005)
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