The conglomerate controlled by Thailand's richest man, Dhanin Chearavanont, has reiterated that its acquisition plan for Ping An Insurance (Group) Co remains on course despite mounting speculation that Chinese regulators may block the US$9.39-billion deal.
CP Group believes the purchase plan is in compliance with the rules and regulations of the Hong Kong Stock Exchange, where Ping An is listed, and that the source of funds is transparent, said Suthana Hongthong, assistant vice-president of CP Group.
She said half the funding would come from four of the group's wholly owned subsidiaries _ Tongying Maoyi Co Ltd, Longfu Group Co Ltd, Shangfa Konggu Co Ltd and Yisheng Fazhan Co Ltd _ and the rest from loans supported mainly by the Hong Kong branch of the China Development Bank (CDB).
A recent report by Chinese media that CDB was reconsidering its decision to back the CP-Ping An pact added a new twist, prompting whispers that the deal is now in danger of collapse.
CDB's concern stems from various media reports that trace CP's first payment for the deal to funding sources not directly tied to the Thai conglomerate, as opposed to the wholly-owned CP units as agreed previously.
Under China's rules, any purchase of a stake in a Chinese insurance company must be financed by internal funds; external funding or financing is not allowed. As such, CP Group would not be able to use CDB to finance the purchase of Ping An shares and a halt to the CDB loan seems the natural outcome.
CP Group said last month it had agreed to pay $9.39 million to acquire a 15.57% stake in Ping An from HSBC Holdings Plc, the major shareholder. Siam Commercial Bank advised on the deal.
An HSBC statement said the sale of its stake in the world's second-biggest life insurer by market value would be completed in two stages. The first stage, comprising shares valued at HK$15 billion ($1.9 billion), was scheduled for Dec 7. The sale of the remaining shares needs approval from Chinese regulators by Feb 1, or else an extension.
If CDB withdraws, CP would need another big lender, according to a source.