Missing Chinese tycoon's Tomorrow Holdings puts investments up for sale - sources

Harbin Bank Co

05/07/2017 11:43

By Julie  Zhu 
    HONG KONG, July 5 (Reuters) - The financial empire of 
missing Chinese-born tycoon Xiao Jianhua has put billions of 
dollars of investments up for sale, including stakes in a life 
insurer, a trust and banking assets, three people involved in 
the process told Reuters. 
    A billionaire with links to China's Communist Party elite, 
Xiao vanished earlier this year. He was last seen in the early 
hours of Jan. 27, leaving the Four Seasons Hotel in Hong Kong in 
a wheelchair with his head covered, accompanied by several 
people described in media reports as mainland Chinese agents. 
 urn:newsml:reuters.com:*:nL4N1FV34X 
    Xiao's whereabouts are not known but his dramatic 
disappearance sparked widespread speculation he had been caught 
up in Chinese President Xi Jinping's crackdown on corruption. 
    Chinese authorities have not commented on Xiao's 
disappearance, and his family could not be reached for comment. 
    Two of the sources with knowledge of the process said that 
now Chinese authorities are  pressing Tomorrow Holdings, Xiao's 
conglomerate, to pare back its sprawling asset portfolio, which 
includes stakes in more than 30 domestic financial institutions. 
    The sale is part of Beijing's broader efforts to rein in 
risky practices by financial services firms, the sources said. 
None of the three sources could be named as the sale plans are 
not public. 
    The same two sources said Tomorrow had set up an internal 
team to handle the sale, which will include stakes in Huaxia 
Life Insurance, New China Trust Co, Bank of Weifang and Baoshang 
Bank. The stakes are substantial, though the specific percentage 
levels have not been disclosed and it is unclear if Tomorrow 
controls all of the companies directly. 
    No external advisers have been mandated, the sources said, 
and they also did not give any indication of expected prices for 
individual assets. 
    "The process is at an early stage and informal feelers are 
being sent to some large insurers as well as private equity 
companies," said a fourth person with knowledge of the plans. 
    According to one source with direct knowledge of the 
situation, Xiao's wife Zhou Hongwen, who co-founded Tomorrow 
with him in 1999, is running the business in his absence, but it 
was unclear how much she was involved in the decision to put the 
assets up for sale and whether she is closely involved in the 
process. 
    Tomorrow and the four subsidiaries did not return phone 
calls, emails and messages seeking comment. China's insurance 
and banking regulators did not respond to requests for comment. 
    The State Council's information office also did not respond 
to a request for comment. 
      
    INSURANCE PLAY 
    Beijing has cracked down on other groups that, like 
Tomorrow, have used cash from insurance products to invest 
aggressively in riskier deals in areas such as property and 
soccer. 
    Last month, authorities detained Wu Xiaohui, chairman of 
Anbang Insurance Group, one of China's flashiest overseas 
dealmakers and owner of the Waldorf Astoria hotel in New York. 
Anbang has said its chairman is temporarily unable to fulfill 
his duties and has not commented further.  urn:newsml:reuters.com:*:nL1N1JA1GQ 
    Even a partial dismantling of Tomorrow's business empire, 
though, would take the aggressive government behavior a step 
further than previous warnings or punishments, and raise 
concerns for other tycoons and their companies. 
    Xiao, who is in his mid-40s and has close ties with some of 
China's senior leaders and their families, was ranked 32nd on 
the 2016 Hurun China rich list, China's equivalent of the Forbes 
list, with a net worth of $6 billion. His assets range from 
financial services to sugar and cement. 
    Xiao, who began his career selling imported computers, had 
lived for years in serviced apartments in Hong Kong. 
    Tomorrow's Huaxia Life grabbed headlines last year as 
China's financial regulators cracked down on high-yield, 
short-term investment products like universal life insurance 
products, that are part insurance, part investment. 
    Huaxia's universal life insurance division recorded 138 
billion yuan ($20.3 billion) in premium income last year - 75 
percent of its total business, official data shows. 
    In December, the China Insurance Regulatory Commission 
suspended the firm's online insurance business and barred it 
from seeking approval for new products for three months. The 
regulator said the insurer had failed to fix problems concerning 
fake client information.  urn:newsml:reuters.com:*:nB9N1EG015  
    The fourth source said the insurance watchdog had demanded 
better oversight, but did not feel Huaxia had made progress and 
wanted to see it owned by someone other than Tomorrow. 
    Barclays  BARC.L  bought a near-20 percent stake in another 
Tomorrow firm, New China Trust a decade ago, making it the first 
foreign bank to invest in a Chinese trust firm. Trusts are 
non-bank lenders that raise funds with high-yielding 
investments. Barclays' stake has since been diluted to below 6 
percent. 
    One of the sources said Barclays would sell part or all of 
its remaining shares. Barclays declined to comment on its stake. 
    Tomorrow will keep hold of affiliates including Harbin Bank 
 6138.HK , which lends to small businesses, brokerage Hengtai 
Securities  1476.HK  and Tianan Life Insurance, maintaining 
licences in the main financial sectors, the people said.  
    The affiliates did not respond to requests for comment.      
  
($1 = 6.7987 Chinese yuan renminbi) 
 
 (Reporting by Julie Zhu; Additional reporting by Sumeet 
Chatterjee in HONG KONG and Shu Zhang in BEIJING; Editing by 
Clara Ferreira Marques and Martin Howell) 
 ((julie.zhu1@thomsonreuters.com; +852 2843 6519; Reuters 
Messaging: julie.zhu1.thomsonreuters.com@reuters.net)) 
 
Keywords: CHINA TOMORROW/SALES