HSBC News Update: China Approves PingAn Stake Sale
HSBC News Update: China’s insurance regulator have granted HSBC permission to sell their PingAn stake to the Charoen Pokphand Group, making a $3bn+ profit. This article is attributed to The Financial Times.
The Charoen Pokphand Group, based in Thailand, have been given the go-ahead for their $9.4bn purchase of a 15.6% stake in PingAn, from the Chinese insurance regulator. HSBC are selling the stake and are looking to make nearly $3bn in profit while the CP Group have already made $1.9bn in paper profit due to the fact that PingAn’s shares are a fifth dearer.
“The deal had been thrown into doubt after China Development Bank got cold feet about providing the finance it had promised to CP Group.
Reports in the mainland press about a Hong Kong-based financier, Xiao Jianhua, being one of a number of people who were really behind the deal triggered an investigation at CDB, according to people familiar with the policy bank. Without CDB’s backing, the China Insurance Regulatory Commission had been expected to block the deal.
CP Group insisted, however, that its subsidiaries – with names such as All Gain Trading and Easy Boom Developments – were the only parties involved and that it had the funds to complete the deal.
HSBC said the subsidiaries had now paid for the rest of the stake in cash.
The CIRC made no mention of financing arrangements in its statement, but its rules do not allow investors to buy a large chunk of an insurance group with borrowed money. HSBC’s statement in December had said that CDB was committed to providing finance for some of the stake.
The privately owned Thai group, which has more than $40bn in assets, according to one person familiar with the business, bought the stake between four subsidiaries, which had not needed to draw down on the CDB credit line.
The subsidiaries were able to take cash from other parts of the group to fund their purchases of Ping An shares, which means the stake was not bought by entities themselves encumbered by any debt.
CP Group has already made a near $400m profit from the first tranche of shares it bought when the deal was agreed in December. The second chunk, which has been awaiting regulatory approval, is worth $1.49bn more than what CP agreed to pay. It will take possession of those shares on February 6.
Ping An stock has climbed since the deal was announced in mid-December. It closed yesterday in Hong Kong at HK$70.85 (almost HK$12.00m) and in Shanghai hit its highest value since July 2011.”
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