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February 1, 2013 11:44 am
China’s insurance regulator has given a green light for Charoen Pokphand Group of Thailand to complete its $9.4bn acquisition of a 15.6 per cent stake in Ping An, China’s biggest private insurer.
HSBC, which is selling the stake, would make a near-$3bn gain, while CP Group has already made a $1.9bn paper profit on the deal because Ping An’s shares are a fifth higher than the HK$59.00 that CP Group agreed to pay.
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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