HSBC sale of Ping An stake may be blocked
Source: Bloomberg News |
January 10, 2013, Thursday
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Print Edition
Print Edition
HSBC Holdings Plc's proposed sale of its stake in Ping An Insurance (Group) Co to Thai billionaire Dhanin Chearavanont is facing speculation that Chinese regulators may block the US$9.4 billion deal.
Current rules from China's insurance watchdog may bar the use of external financing for such deals, Esther Chwei, an analyst at Deutsche Bank AG in Hong Kong, said in a note. China Development Bank, a policy lender that had agreed to fund part of the purchase for Dhanin's Charoen Pokphand Group, has canceled its loans, Caixin Online has reported.
CP Group has sought to allay concerns that it's backed by other investors, saying last month that it used "legal capital" to buy part of the stake in China's second-largest insurer. Dhanin, 73, is making a rare foray into financial services after having spent 43 years building a family seed business into Thailand's biggest agricultural company and conglomerate.
"The main issue here isn't about financing because even if CDB backs off, there will be other banks that are willing to offer loans to CP," said Wilson Li, a Shenzhen-based analyst at Guotai Junan Securities Co. "The issue is about how the regulator views the buyer and the structure of the deal. I don't think that's favorable at the moment."
HSBC said on December 5 that it agreed to sell its 15.6 percent holding in Ping An to four subsidiaries of CP Group in two phases. The first stage, comprising shares valued at about HK$15 billion (US$1.9 billion), was set for December 7. The sale of the remaining shares requires approval from the China Insurance Regulatory Commission by February 1, or an extension of the accord.
"It's prudent for regulators to examine large deals involving key companies and strategic assets," Sandy Mehta, chief executive officer of Value Investment Principals Ltd, said yesterday. "It's difficult to say what conclusion the regulators will arrive at."
Ping An spokesman Sheng Ruisheng said on Tuesday that the deal was in a "normal approval process" and the Shenzhen-based insurer had no additional information.
The CIRC will likely veto the deal because funding has not been arranged, the Wall Street Journal reported.
Current rules from China's insurance watchdog may bar the use of external financing for such deals, Esther Chwei, an analyst at Deutsche Bank AG in Hong Kong, said in a note. China Development Bank, a policy lender that had agreed to fund part of the purchase for Dhanin's Charoen Pokphand Group, has canceled its loans, Caixin Online has reported.
CP Group has sought to allay concerns that it's backed by other investors, saying last month that it used "legal capital" to buy part of the stake in China's second-largest insurer. Dhanin, 73, is making a rare foray into financial services after having spent 43 years building a family seed business into Thailand's biggest agricultural company and conglomerate.
"The main issue here isn't about financing because even if CDB backs off, there will be other banks that are willing to offer loans to CP," said Wilson Li, a Shenzhen-based analyst at Guotai Junan Securities Co. "The issue is about how the regulator views the buyer and the structure of the deal. I don't think that's favorable at the moment."
HSBC said on December 5 that it agreed to sell its 15.6 percent holding in Ping An to four subsidiaries of CP Group in two phases. The first stage, comprising shares valued at about HK$15 billion (US$1.9 billion), was set for December 7. The sale of the remaining shares requires approval from the China Insurance Regulatory Commission by February 1, or an extension of the accord.
"It's prudent for regulators to examine large deals involving key companies and strategic assets," Sandy Mehta, chief executive officer of Value Investment Principals Ltd, said yesterday. "It's difficult to say what conclusion the regulators will arrive at."
Ping An spokesman Sheng Ruisheng said on Tuesday that the deal was in a "normal approval process" and the Shenzhen-based insurer had no additional information.
The CIRC will likely veto the deal because funding has not been arranged, the Wall Street Journal reported.
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