from today's FT
so no more JV, a great setback for both Fortis and 2318
wondering if it would develop its own asset management, or together with HSBC?
a bit worrying if you read the last paragraph
Chinese insurer looks to scrap planned deal
By Sundeep Tucker and Jamil Anderlini in Beijing
Published: September 29 2008 23:42 | Last updated: September 29 2008 23:42
Ping An, the Chinese insurer, is considering scrapping its proposed asset management joint venture with Fortis following the shock capital injection by European governments into the troubled Belgo-Dutch group.
Fortis in March agreed to sell a 50 per cent stake in its asset management division to the mainland insurer for €2.15bn ($3.3bn, £1.7bn) to pursue a landmark cross-border collaboration, and the deal is awaiting approval by Chinese regulators.
However, people close to the situation said Ping An would now review whether to pursue the proposed joint venture, renegotiate the terms or pull out of the deal. As well as a heavy financial blow, the collapse of the venture would dent Fortis’s ambitious China expansion plans.
People familiar with the matter said Ping An already faced an uphill task to convince Chinese regulators of the merits of deepening its ties with Fortis because it had suffered a massive paper loss on its previous investment in the financial services group.
Ping An last November paid $2.7bn to acquire a 4.2 per cent equity stake in Fortis, and later upped the holding to 5 per cent. The bulk of the shares were acquired at €19.05. Fortis closed down 24 per cent on Monday at €3.97.
One person said: “Fortis’s financial position, management and shareholder base has changed dramatically since March. Will the European governments now allow it to invest in Asian expansion? Ping An will need clarity, assurances and a price cut if it is to proceed with this.”
Another said: “The thought of pouring more money into Fortis has scared the government and its own domestic shareholders. What has just happened will make it far tougher for Ping An to win over the sceptics.”
Ping An said on Monday it was preparing to make an impairment provision on its Fortis investment. Its shares closed down 10.5 per cent at HK$42.5.
Ping An said it welcomed the €11.2bn capital injection as “positive news for shareholders and customers of Fortis” but noticeably failed to reiterate its commitment to the proposed asset management venture.
Fortis executives speaking on a conference call with analysts on Monday said that they had not included the €2.15bn proceeds of the asset management sale in their revised calculations of core equity.
Ping An, which is 16.8 per cent owned by HSBC, is facing its own problems at home in China, including an ongoing tax investigation and falling profits.
Tax investigations into large, politically connected companies like Ping An are rare in China and are usually only undertaken by tax officials under instructions from powerful political figures.
Several people familiar with the matter have told the Financial Times they believe Ping An has fallen out of favour with some senior Communist party figures, who are sending a message to Ping An through the tax probe, and by delaying approval for the asset management deal as well as a massive capital-raising plan.
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