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Bankers for ING sent financial details of the Dutch group’s $6bn Asian insurance businesses to a string of bidders late on Friday firing the starting gun on what will be a keenly fought contest for the units.
The sale of businesses in Korea, Malaysia and Japan is seen by insurance industry observers as one of the last opportunities for any group that is under-represented in the world’s most promising life assurance markets to gain a significant foothold at one attempt.
However, bankers representing a group among those preparing potential bids said it is likely to prove very difficult to beat AIA in the auction if the Hong-Kong listed pan-Asia group decides it wants the businesses because its highly rated stock means it is likely to have more firepower to offer a higher premium.
MetLife of the US, which has Credit Suisse as an adviser, and Prudential Financial of the US, advised by Bank of America Merrill Lynch, are the leading US bidders, while Manulife of Canada has hired Citigroup to lead its efforts. Of those three, Prudential has the most limited presence in Asia, though it has been growing in Japan through acquisitions.
Prudential US also has a presence in Korea, but ING’s business there has attracted a lot of interest from local bidders who want only that unit, including Kookmin, which is being advised by Barclays.
Life assurance businesses in emerging Asian economies are the fastest growing in the world as an emergent middle class begins to take measures to protect its improving lifestyle in countries that usually have little if any public welfare support. South-east Asian markets such as Malaysia and Indonesia are among the most promising, while China has huge potential but is very difficult to gain a significant presence in because of dominant local companies such as Ping An, and restrictions on foreign operators.
Japan, South Korea, Hong Kong and Singapore are much more mature, but still have the potential to produce good cash flows.
Japan is the smallest and least attractive of ING’s businesses, worth only a few hundred million dollars according to bankers, while the South Korean and Malaysian units are worth more than $2.5bn each.
It is still unclear whether ING will insist on bids only for the entire block of businesses in the first round in order to improve its chances of offloading all of them, or whether it will run a more open and flexible process that allows those interested only in one or two units to make offers for them, bankers said.
ING, which is being advised by Goldman Sachs and JPMorgan, decided to sell the Asian insurance businesses separately from those in Europe because it expects to get a better price more quickly for the Asian units. It was directed to sell all the businesses by European authorities after receiving state support during the financial crisis.
It has also decided to sell its Asian asset management business separately and retained Credit Suisse to run that process last month. The information memorandum for that sale is likely to come out later this month.