ING Japan’s corporate business being circled by Manulife

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ING Japan’s corporate business is being eyed by listed Toronto, Canada-headquartered Manulife Financial as a possible acquisition target, a source familiar and a banker following the situation told mergermarket.

Netherlands-based ING Group has retained Nomura Securities to sell its Japan unit, ING Life Insurance Co., as part of an ongoing divestiture of its Asian insurance business, as earlier reported by mergermarket. Goldman Sachs—retained by ING Group as the overall advisor to the sale of ING Asia—is also overseeing the sale of ING Japan, the banker, a second source, and a person familiar with the situation said.

Goldman Sachs and ING Japan declined to comment.

Manulife is interested in acquiring the corporate business, while ING Japan’s annuities business has also been considered, the first source noted. However, Manulife is unlikely to move on the variable annuities business, as it would significantly alter its portfolio business, he continued.

It was previously reported that funds Apollo Global Management and J.C. Flowers were interested in ING Japan. However, the banker noted that it might be difficult for either to gain approval from the Japanese financial authorities (JFSA), as the two firms will likely exit in a few years’ time.

A source familiar with J.C. Flowers, meanwhile, confirmed interest in the Japan unit, but acknowledged that the private equity firms could encounter an uphill regulatory outlook for approval, as PE firms are not known to be in these situations for the long haul.

For a strong strategic buyer such as Manulife, regulators may act more positively regarding an acquisition compared with offers from lesser known strategics or PE funds, the first source said.

Manulife has not ruled out the possibility of acquiring portions of ING in certain countries, according to a media report citing CFO Steve Roder. The insurance giant is reportedly bidding for ING’s Southeast Asia unit, which includes locations in Hong Kong, Malaysia, and Thailand, and estimated to be worth around USD 2.1bn, based on a price-to-earnings ratio of 15x, according to media reports.

Manulife declined comment, while J.C. Flowers did not respond to calls seeking comment.

ING Japan has two primary businesses: corporate and personal (variable annuities, etc). The former offers smaller Japanese businesses term-insurance products, according to a spokesperson at ING Japan, who added that a “large part” of its income comes from the corporate business.

According to local reports, the Japan unit has about USD 22.2bn of variable annuity policies that could be a liability if capital markets take a beating. This news service previously reported the sale of ING Japan had not received much interest in Japan, given its limited presence and saturated market.

The Japan insurance unit, which is capitalized at JPY 32.4bn (USD 408.8m), posted revenues of JPY 371.2bn (USD 4.7bn) with net profit of JPY 6.7bn for the year ended March 2012, according to its website. This compared to JPY 369.8bn and JPY 7.55bn in sales and net profit a year earlier.

With additional reporting by Mark Eissman in Chicago

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