April 17, 2013 1:00 pm

ING files for $1.4bn flotation of US arms

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ING has filed for an initial public offering of its ING US retirement, investment and insurance business, moving a step closer to meeting requirements imposed by the European Commission as part of its bailout during the financial crisis.

The IPO, expected to be launched next month, is expected to raise about $1.4bn at a share price of between $21 and $24. It will reduce the Dutch bancassurer’s stake in ING US to at most 75 per cent, with the rest of the unit to be divested over time. Some $600m worth of the shares will be new equity issued by ING US, while the rest will consist of shares in ING US sold off by ING.

If demand is sufficient the group could sell more stock, reducing its stake in ING US to as little as 71 per cent.

The commission ordered ING in 2009 to split its banking and insurance arms and to divest its US and Asian businesses as a condition of the €10bn in aid the company received from the Dutch state. ING says it is eager to fulfil the commission’s requirements so that it can resume paying dividends.

The group has already sold off its Latin American and most of its Asian operations, and has separated the European banking and insurance arms.

“Investors are waiting for ING to switch from a restructuring case to a normal case,” said Cor Kluis, an analyst at Rabobank. “This gives you hope that before the end of this year they can finish more of the restructuring and become a normal bank.”

ING plans to use the proceeds from selling existing stock in ING US to reduce €7.1bn in so-called “double leverage”, or debt which the group’s holding company had built up by borrowing to buy shares in its own holdings. The Commission has ordered the company to eliminate double leverage.

The sale will not affect its core capital, and the results of ING US will continue to be consolidated with the rest of the group.

Howevwer, the sale will reduce the equity of ING shareholders by about $1.6bn, the bank said, reflecting the difference between the sale price of the shares and their current book value.

Jan Willem Weidema, an analyst at ABN Amro, observed in a note that this valuation of about 0.5 times book value was somewhat higher than that of shares in ING itself, which are at 0.4 times book value.

Investors expect the group may sell another tranche of ING US later this year, possibly before October, when Jan Hommen, chief executive, is expected to step down.

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