Last updated: July 25, 2011 4:55 pm

ING: disposal is not a bad deal

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Dutch bancassurance group makes the best of a tough mandate

It’s no fun being a forced seller. But Dutch bancassurance group ING, obliged to sell its insurance, asset management and US online banking businesses to comply with European Union rules on state aid, is making the best of a tough mandate. Its latest disposal, the €2.7bn sale of most of its Latin American insurance operations to Colombian conglomerate Grupo de Inversiones Suramericana, is not a bad deal.

Medellín-based GrupoSura will pay 1.8 times book value for a tidy earner (net income of €192m on revenue of €670m last year). For ING, that compares favourably with last month’s disposal of the ING Direct US business to Capital One – $9bn was barely book value, but part payment in shares provided some upside for its investors.

ING’s proposal for deploying its €1bn of net proceeds may cause some dismay among investors, however. They had expected it to reduce some of its bank-and-insurance double leverage, put at €8.4bn by JPMorgan Cazenove, or even pay back the last €3bn from its €10bn state bail-out package. But ING thinks it can get more bang by cutting gearing in the insurance business, by about €2.8bn.

That is not daft. With ING, Brussels and The Hague haggling over state-aid repayment terms – ING is supposed to pay a 50 per cent premium on redemptions, but wants an early repayment discount – it makes sense to put lipstick on its insurance pit bull. After all, ING still has to unload all its remaining insurance operations, with an equity value of perhaps €19bn – ample to wipe clean all of ING’s slates.

Jan Hommen, chief executive, was dealt a lousy post-crisis hand. Selling even ING’s growth assets was always going to be tough. He is playing like a master, but ING trades at a 15 per cent discount to book, suggesting his investors want him to play the hand out. Hang in there Mr Hommen.

E-mail the Lex team in confidence at lex@ft.com

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