Dealtalk: China firms keen on $1 bln Hong Kong insurance asset auction -sources

Dah Sing Financial Holdings

04/02/2016 04:11

(For more Reuters DEALTALKs, double click on  DEALTALK/ ) 
    * Country Garden, China Life, others keen on Dah Sing 
asset-bankers 
    * Dah Sing has put up insurance business for strategic 
review 
    * Chinese firms eager to diversify country, currency 
risks-banker 
 
    By Denny Thomas 
    HONG KONG, Feb 4 (Reuters) - Property developers and other 
Chinese firms have shown strong interest to bid for the $1 
billion insurance asset of Hong Kong's Dah Sing  0440.HK  as 
they seek diversification from a slowing mainland economy and a 
weakening yuan, sources with direct knowledge of the matter 
said. 
    The Chinese companies have been very enthusiastic even 
though some have little or no insurance-sector experience, said 
the sources. China's fourth-biggest developer, Country Garden 
Holdings  2007.HK , and its biggest insurer, China Life 
 601628.SS , are among those that have flagged their interest, 
they added. 
    Since Dah Sing Financial Holdings announced a strategic 
review of the business on Jan. 12, the company and its adviser, 
Citigroup  C.N , have received indications of interest from more 
than 20 Chinese companies, two sources familiar with the sale 
process told Reuters. 
    "There is a strong desire among Chinese companies to 
diversify their country risk and the currency risk," one of the 
sources said. 
    Global and regional insurers, including Sun Life Financial 
 SLF.TO , Prudential plc  PRU.L , Metlife Inc  MET.N  and AIA 
Group  1299.HK , have also expressed a desire to join the 
bidding race, the sources said. 
    The identities of the other interested Chinese companies 
could not be determined. It is not clear which companies will 
make formal bids. 
    Country Garden, Prudential, Metlife, Sun Life, AIA and 
Citigroup declined to comment. China Life did not respond to 
requests for comment. 
    Dah Sing did not reply to a request for comment but had said 
last month a number of options are under the group's 
consideration as part of the strategic review and that no 
timetable had been set for its completion.  
    The sources did not want to be identified because the sale 
process is confidential. 
     
    CAPITAL OUTFLOWS 
    The Chinese interest showcases a broader problem for the 
world's second-biggest economy. While its government has been 
supportive of companies' overseas M&A drive, a surge in outbound 
purchases, which hit a record $116 billion last year, undercuts  
Beijing's efforts to tackle its capital-outflow problems. 
    China has suffered about $700 billion in capital outflows 
last year, amid a stock market turmoil and a shock currency 
devaluation. Authorities have tried to stem the outflows by 
intervening heavily in the market and clamping down on various 
channels to take money overseas. 
    Chinese corporations have launched another $60 billion worth 
of deals in 2016, including ChemChina's record $43 billion 
agreed bid for Swiss seeds and pesticides group Syngenta 
 SYNN.VX  on Wednesday, making it the best start to a year on 
record.  urn:newsml:reuters.com:*:nL8N15I0H3 
    Bankers say their China outbound M&A pipeline is strong and 
many are betting on another bumper year, which will only add to 
Beijing's nervousness about capital outflows. 
    "We aren't seeing deals being impacted by capital controls 
issues," said the head of M&A at a Wall Street investment bank. 
"On the contrary, we are seeing more new clients showing 
interest in buying overseas assets," the person said, adding 
that his team spends about 70 percent of its time on China 
deals. 
    The Chinese suitors' aggressive overseas M&A push could lead 
to them overpaying for assets or make their global rivals pay 
top dollar to win bids.  
    "In an attempt to pre-empt Chinese competitors from 
acquiring their way into a foreign market, global corporations 
may end up paying too much in the counter-bidding," said Howard 
Yu, professor of strategic management and innovation at IMD, 
Geneva. 
 
 (Additional reporting by Saeed Azhar in SINGAPORE and Engen 
Tham and Saikat Chatterjee in HONG KONG; Reporting by Denny 
Thomas; Editing by Lisa Jucca and Muralikumar Anantharaman) 
 ((denny.thomas@thomsonreuters.com; +852 2843 6358; Reuters 
Messaging: denny.thomas.thomsonreuters.com@reuters.net)) 
 
Keywords: DAH SING INSURANCE/