Ping An Buys Half of Fortis Asset Arm

By Tony Munroe | March 20, 2008

China’s Ping An Insurance Co Ltd. deepened its ties with Belgian-Dutch financial group Fortis on Wednesday by buying half its asset management business for €2.15 billion ($3.4 billion).

Ping An, China’s second largest life insurer, also lifted its stake in Fortis to 4.99 percent from 4.18 percent, the companies said in a statement. The shares were bought on the open market, a Fortis spokeswoman said.

In the latest foreign acquisition by a Chinese firm, the deal expands the existing relationship between Fortis and Ping An, which is the European firm’s largest shareholder, and builds on Ping An’s three-pronged strategy to grow its insurance, banking and asset management units.

Fortis will get a much-needed cash injection to shore up its capital base, eroded by financing for the acquisition of ABN AMRO’s Dutch operations and asset management unit as well as subprime-related writedowns.

Including the €2.15 billion from Ping An, Fortis expects to add €3.5 billion [$5.41 billion] in cash over the next couple of years to its capital base.

Fortis Chief Executive Jean-Paul Votron called the deal a “unique opportunity to accelerate our growth plans for asset management, particularly within high growth markets such as China and elsewhere in Asia.”

The business will be rebranded as “Fortis Ping An Investments” and includes ABN’s asset management unit, which will merge with Fortis next month and have €245 billion [$379 billion] euros in assets under management.

Shareholders in Ping An recently agreed to allow the firm to raise about $16 billion through one of the world’s biggest corporate fund raisings — a war chest the company has said it aims to use in part for acquisitions.

“This aligns with Ping An’s business strategy, as it wants to invest in European assets and expand its securities and trust business,” said CLSA analyst Dominic Chan. The deal is “perfectly aligned with Ping An’s long terms development strategy,” Ping An Chief Executive Peter Ma Mingzhe said in a statement.

Fortis had hinted two weeks ago that it was in talks with an unidentified partner on a deal that would shore up its capital base by €2 billion [$3.093 billion], helping to lift its shares despite its announcement of a €1.5 billion [$2.32 billion] subprime-related writedown.

Fortis shares rose 1.43 percent on Wednesday to €14.92 [$23.07] at 1550 GMT, while other European financials were flat. The stock is up 4.4 percent since the March 7 announcement.

Ping An, which also reported on Wednesday that its 2007 earnings more than doubled, saw its shares rise 2.9 percent in Honk Kong to HK$53.30 [$6.85].

Last week, Fortis said its plan to integrate the asset management units of Fortis and ABN was going smoothly and would be the first step in merging the companies after the €70 billion [$108.3 billion] buyout of ABN last year by Fortis, Royal Bank of Scotland and Santander.

The deal marks the latest foray by Chinese financial giants overseas, eager to use their cash from furious growth in home markets to tap new markets and acquire know-how.

Last year, Industrial and Commercial Bank of China paid $5.6 billion to buy 20 percent of South Africa’s Standard Bank in the biggest foreign acquisition by a Chinese commercial bank.

Merrill Lynch was advising Fortis on the deal, and JP Morgan was representing Ping An. (Additional reporting by Kennix Chim in Hong Kong, Julien Ponthus in Brussels, and Gilbert Kreijger in Amsterdam; editing by Elaine Hardcastle and Keith Weir)

By Tony Munroe and Reed Stevenson
HONG KONG/AMSTERDAM, March 19 (Reuters)

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