BEIJING Chinese regulators have finally cleared the US$7.4-billion sale to Thailand's CP group by HSBC Holdings of its stake stake in Ping An Insurance (Group) Co, ending six weeks of speculation over the deal's fate.
CP and HSBC said payment was made in cash after the China Insurance Regulatory Commission approved the sale of 976.1 million Hong Kong-traded shares in the country's second-largest insurer. The transfer would take place by Wednesday, HSBC said in a separate statement.
The transaction will generate a $2.6-billion profit for London-based HSBC, bolstering CEO Stuart Gulliver's efforts to revive earnings.
CP Group, controlled by billionaire Dhanin Chearavanont, said on Jan 11 that it had the resources to complete the purchase, easing concern that the deal would collapse after the business news group Caixin Online reported that China Development Bank Corp had withdrawn financing.
"Given all the twists and turns, this outcome is quite a surprise and the best for all," said Li Wenbing, a Beijing-based analyst at Bocom International Holdings.
"With a relatively passive investor like CP, Ping An's management can maintain their control on the firm's operation and leverage some of CP's expertise in tapping the rural financial sector."
CP was the very first approved foreign investor in China in 1978 and remains one of the largest foreign investors in the world's second-biggest economy today. It has a presence in every province in the country, with interests in agribusiness, retailing, manufacturing and many other areas.
Shares in Ping An have gained 23% in Hong Kong trading since Dec 4, the day before the sale was announced. Thats 20% more than the HK$59 per share that CP agreed to pay.
HSBC agreed on Dec 5 to sell its 15.6% holding in Ping An to four subsidiaries of CP Group in two phases for about US$9.4 billion. The first stage, comprising shares valued at US$1.93 billion, was completed Dec 7. The rest required approval from the China Insurance Regulatory Commission by yesterday.
The acquisition of four-fifths of the shares would be funded with cash as well as a financing agreement from the Hong Kong unit of China Development Bank, HSBC had said in December.
CP Group didn't use that credit facility from China Development Bank, which is a policy lender based in Beijing, to finance any part of the purchase, said a person with knowledge of the transaction.
The person, who asked not to be identified, didn't say how CP Group raised funds for the deal. The statements issued on Friday made no mention of how the deal was funded.
"This is good news as it removes the uncertainty," said Olive Xia, a Shanghai-based analyst at Core Pacific-Yamaichi International Ltd, who recommends investors buy the shares. "We still prefer Ping An among Chinese insurers and the stock has some upside."
Dhanin, 73, planned to make a foray into financial services after spending more than four decades building a family seed business into Thailand's biggest agricultural company and conglomerate.
His net worth was an estimated $6.6 billion as of today, according to the Bloomberg Billionaires Index. Almost 60% of the fortune is from overseas private companies.