Thai Life Insurance Plc may sell a stake of at least 20%, say sources familiar with the matter, in a deal that could value the country's No.2 life insurer at US$2.5 billion (76.7 billion baht) and mark the third auction in the domestic sector within a year amid a wave of mergers and acquisitions.
Highlighting fast-growing interest in one of Asia's most underdeveloped insurance markets, the potential sale comes on the heels of Prudential Plc's $590-million acquisition of Thanachart Life Assurance last month and Hong Kong tycoon Richard Li's purchase of ING's Hong Kong and Thailand units for $2.1 billion in October.
Announced Thai M&A deals have soared to a record $18.7 billion this year on mostly outbound acquisitions, overtaking the total value of deals in 2010 and 2011 combined, according to Thomson Reuters data.
In contrast, Asia-Pacific deals excluding Japan are down by 12% from last year at $298 billion.
Most of the deals are driven by cashed-up companies eager to expand abroad and include an audacious $7.2-billion bid by Thai tycoon Charoen Sirivadhanabhakdi for the shares he does not own in Singaporean conglomerate Fraser and Neave Ltd.
For the inbound offers, suitors see steady growth and rising demand for products such as consumer goods and financial services, not to mention valuations that are only getting richer.
The Thai Life stake sale is expected to draw interest from Japanese suitors and other financial institutions, said the sources, who have direct knowledge of the matter and declined to be identified since the matter is not public.
As with any auction, there is no guarantee that the process will end in a sale.
The company, controlled by the Chaiyawan business family, will likely issue new shares as part of the deal, while the founders are also expected to sell part of their stake, said the sources.
A minority holding may be less attractive to some suitors, although Japanese insurers in the past have shown a willingness to buy non-controlling stakes.
Thai Life's Duangduen Kongkasawad, the executive vice-president for communications, said the company has no plans to sell a stake to a strategic partner.
But she acknowledged that Thai Life over the years has drawn interest from several foreign investors for its financial stability, No.2 market share and long and vast experience in life insurance.
"Existing shareholders have yet to make any decision on this issue," said Ms Duangduen.
She said the company has, however, hired advisers to study market conditions and prepare for intensifying competition.
As part of the effort, the company raised its registered capital to 10 billion baht from 500 million.
The sources told Reuters that the company is expected to launch a sale in next year's first quarter and is working with Barclays Plc as an adviser.
A Hong Kong-based Barclays spokesman declined to comment.
The Thai Life Assurance Association said Thai Life had 15.3% of the Thai life insurance market with annualised premiums equivalent of 6.2 billion baht at the end of the second quarter.
It trails industry leader the AIA Group (20.4%), while third-ranked Muang Thai Life Assurance Co is close behind (15.1%).
Foreign insurers, particularly heavyweights such as AIA and Prudential, are attracted to Southeast Asia, which accounts for less than 0.25% of the global insurance market, according to research by England's Norton Rose.
Thailand is among the most underinsured nations in Southeast Asia, with just 25% of the country's population of 70 million owning life insurance.
Fitch Ratings said its ratio of insurance sales to gross domestic product is only 2.7% compared with 3.3% for Malaysia and 4.3% for Singapore.
But it is also seen as one of the fastest-growing life insurance markets in the region.
Fitch estimates Thailand's life insurance industry grew by 17.5% in the first seven months of this year to $6.9 billion.
Swiss Re forecasts life insurance premiums in Thailand will grow by 6% next year compared with only 4.5% for all of Asia.
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