HSBC, one of the largest international banks, has entered into an agreement to acquire a 10 percent stake in Vietnam’s leading insurance and financial services group, Vietnam Insurance Corporation (Bao Viet), for VND4,121 billion (approximately $255 million). HSBC will be the insurer’s sole foreign strategic partner.
This is the third deal in less than a week involving foreign companies acquiring stakes in Vietnam’s insurers. France’s AXA Group announced a partnership with Bao Minh (See IJ web site Sept. 12). Last week Chubb also announced a partnership with Bao Minh (See IJ web site Sept. 5).
In a certain sense HSBC, which began in China, as the Hong Kong and Shanghai Banking Corporation, is reestablishing old ties. It opened its first office in Saigon (now Ho Chi Minh City) in 1870. The branch operated for over 100 years, until its closure in 1975.
HSBC said it would “offer the Vietnamese company technical assistance across all its businesses, with a focus on further enhancing its insurance capabilities. This will include the secondment of specialist employees and the provision of training to Bao Viet.”
The Company is Vietnam’s largest general insurer with a market share of 35.2 per cent and 20.2 million policyholders in 2006. It is also a leading life insurer with 1.6 million policies in force. Bao Viet provides “a diverse range of financial products and services to the rapidly growing domestic market,” said HSBC’s bulletin. “It has 126 branches and 400 sub-branches, 5,000 employees and 40,000 agents,” with total assets of $1.039 billion.
Stephen Green, Group Chairman of HSBC Holdings plc, indicated that the investment “reflects a growing commitment to Vietnam, and is in line with HSBC’s stated strategy of targeting investment at high growth markets with international connections. Vietnam is one of the fastest growing economies in Asia, with average GDP growth of more than 7 percent in the past 10 years.”
He also noted that the deal “complements HSBC’s growing presence in the country’s banking sector – where we were the first foreign bank to receive approval for a 15 per cent strategic investment in a domestic Vietnamese bank, Techcombank – and reinforces our commitment to build presence in emerging markets.”
Clive Bannister, Group Managing Director, Insurance, HSBC Holdings plc, also expressed his excitement with the deal, and went on to state that “the opportunities afforded by this strategic partnership which extends our reach in the Asia-Pacific region, leverages our global insurance capabilities and reinforces our aim to be a top 10 global insurance player. HSBC Insurance contributed US$1.6 billion to pre-tax profit in the first half of 2007, and delivers 30 million policies in 44 countries and territories a year.”
Le Quang Binh, Chairman of Bao Viet, indicated the partnership with HSBC would strengthen his Company and enable it to further expand its products and services.
The bulletin noted: “Under the terms of the agreement, HSBC – through HSBC Insurance (Asia Pacific) Holdings Limited (HSBC Insurance) – has committed to hold its shares in Bao Viet for a minimum period of five years. During this period, it has an option to purchase an additional 8 per cent of Bao Viet shares from the Ministry of Finance (MoF) at the then prevailing market price. Additionally, HSBC has certain pre-emptive rights to acquire shares currently owned by the MoF, subject to HSBC’s total shareholding being limited to 25 per cent within the first five years of the agreement, and prevailing foreign ownership limits thereafter. HSBC’s option and pre-emptive rights are subject to certain limitations and conditions.”
Source: HSBC – www.hsbc.com
Topics Mergers & Acquisitions
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