News eDaily13 Sep 2017

China:Financial institutions abroad to be M&A targets by Chinese

13 Sep 2017

The next wave of Chinese acquisitions abroad would focus on the financial sector, with banks, insurers and asset managers in Europe and Asia among the targets for Chinese entities to tap funds, expertise and markets.

While banks may be tough targets, bankers and executives say Chinese institutions and conglomerates could instead target insurance, asset management or wealth managers, reported Reuters.

Last week, sources familiar with the matter said two of China’s most acquisitive conglomerates, HNA Group and Anbang Insurance Group, had separately considered bidding for the German insurer Allianz.

Neither of the two made an offer, but the talks marked a new level of ambition for China: Allianz is a German stalwart, a pillar for local pensions and a global powerhouse with EUR1.9 trillion (US$2.3 trillion) of assets under management. HNA already owns a stake of just under 10% in Deutsche Bank.

Bankers, lawyers and company executives say more financial deals will come, led by state behemoths such as China Life and China Everbright, as well as private firms including Legend Holdings and China Minsheng Financial .

“The message from the regulators is clear - they want these companies to go out and get access to large amounts of funds and expertise,” said a financial M&A adviser at a global bank, who works with Chinese regulators and companies.

The banker, who declined to be named as he was not allowed to speak to the media, said his firm was currently working on several “mid-sized to large” foreign financial takeover deals.

After a deal spree that saw Chinese conglomerates spend billions on everything from landmark property to soccer clubs in a debt-fuelled M&A drive over the past two years, Beijing has sought to rein in some of the excesses. But Belt and Road deals have been an exception in the crackdown this year -- including, most recently, financial deals.

Earlier this month, Legend -- the top shareholder in the computer maker Lenovo -- agreed to buy a 90% stake in Banque Internationale a Luxembourg (BIL) for $1.8 billion. The deal, Legend said, was linked to the Belt and Road initiative, President Xi Jinping’s policy of building a modern Silk Road to expand global trade and influence.

“Our overseas investments will continue to focus on the opportunities that are provided by the Belt and Road national policy,” the company said, in a statement to Reuters, adding it would “actively invest” in other areas of financial services, including insurance, securities and financial technology.

Bankers said Legend has been eyeing banks and insurers in Southeast Asia, Europe and Hong Kong, using its healthy balance sheet and the halo effect of Belt and Road-linked initiatives.

Better financial expertise and depth will help China secure contract guarantees, financing and better insurance.

“We need those overseas financing institutions - buying them can expand our bank assets and boost foreign firms’ participation in our projects abroad,” said Huo Jianguo, vice-chairman of the China Society for WTO Studies, under the Ministry of Commerce.

“China is having a hard time attracting international institutions to get involved” in Belt and Road projects, Mr Huo said. “If that persists it will become a one-man show, which is not sustainable.”


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