Major China Insurer Ping Selling Shares to Finance Acquisitions

By | January 23, 2008

A major Chinese insurer has announced plans to raise up to $22 billion (euro15.0 billion) for acquisitions at a time when U.S. and European banks, battered by mortgage losses, want infusions of Asian capital to replenish their balance sheets.

Ping An Insurance Co.’s plan comes amid a boom in China’s financial markets. Its size would rival China’s biggest initial public offering to date, which raised $21.9 billion in October 2006 for Industrial & Commercial Bank of China.

Ping An will raise the money by selling new shares and bonds on Chinese markets, the company said on its Web site in a statement dated last Friday. The company raised 39 billion yuan (US$5 billion; euro3.9 billion) in an IPO last February on Chinese markets.

But the insurer’s shares fell Monday by the maximum daily limit of 10 percent amid concern that the huge share issue _ accounting for about 14 percent of its capital _ would dilute earnings.

The new money will pay for mergers or acquisitions that fit with its banking and asset management businesses, it said.

Ping An’s press office declined to say where the bank might invest.

“I have no information on this issue,” said an office employee, Chen Yangyang.

U.S. and European banks have suffered billions of dollars (euros) in losses on mortgage lending, and some have turned to China and elsewhere in Asia to raise money from new investors.

China’s government investment fund agreed in December to invest $5 billion in Morgan Stanley. In October, Bear Stearns Cos. agreed to a $1 billion cross-investment with state-owned Citic Securities Co. And Citigroup has raised $4.4 billion from Singapore’s state-owned Temasek Holdings and another $6.6 billion from Korean, Kuwaiti and Japanese investors.

In November, Ping An paid 1.8 billion euros ($2.6 billion) for a 4.2 percent stake in Fortis, Belgium’s biggest financial services firm, in its first overseas acquisition.

Ping An, based in China’s southern financial center of Shenzhen, said in December it had received government approval to invest up to 15 percent of its assets abroad.

British Prime Minister Gordon Brown visited China last week and said he would welcome investment by Beijing’s state fund and said it should use London as a base to expand abroad. Brown’s government is trying to arrange the sale of troubled mortgage lender Northern Rock.

Ping An’s plan calls for selling 1.2 billion new shares — which would raise about 117 billion yuan ($16.3 billion; euro11.2 billion), based on last Friday’s closing stock price — and bonds worth 41.2 billion yuan ($5.7 billion; euro3.9 billion).

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On the Net:

Ping An Insurance Co.: www.pa18.com/pa18Web/framework/index.jsp

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