HSBC Holdings plc (LON:HSBA) (NYSE:HBC), Europe’s largest bank announced plans to sell its 15.6 percent stake in Ping An, China’s second largest life insurance company for $9.4 billion. Britain’s HSBC plans a shift towards its traditional banking business.
The buyer is a conglomerate controlled by the Thailand’s richest man, Dhanin Chearavanont. The deal would be Asia’s second largest deal this year. Ping An Insurance (Grp) Co of China Ltd (SHA:601318) is one of the world’s largest insurers, with 74 million clients and half a million agents.
HSBC Group Chief Executive Stuart Gulliver said the firm would “strengthen our focus on growing our own operations and building on our long-term strategic banking partnership with the Bank of Communications”, China’s fifth largest lender, in which HSBC Holdings plc (LON:HSBA) (NYSE:HBC) has a 19 percent stake.
Ping An Insurance (Grp) Co of China Ltd (SHA:601318)’s core business is life insurance, property, and liability insurance, and it also has a concentration in other financial services. The organization also has its own bank. A spokesperson of the company said that there are no plans to bring out any strategic changes with the new stakeholder. Ping An was in the news recently when New York times published the news that relatives of Chinese premier Wen Jiabao earned from the company’s Hong Kong listing in 2004 by buying stock at a discount before the sale.
HSBC Holdings plc (LON:HSBA) (NYSE:HBC) has been selling the non-core assets as a part of broad reorganization plan premeditated to boost sales. “They can unload their non-core assets and resources to refocus on their main business, which is banking,” Tanrich Securities Vice President Jackson Wong told AFP.
Charoen Pokphand, controlled by Thai tycoon Dhanin Chearavanont, started as an agricultural business, but has developed into a huge corporation, with interests in sectors ranging from retail to telecom and software solutions to real estate. Charoen Pokphand group has a long record in China. It was the first multinational to invest in China’s Agri-business in 1979, and it was given the task of assisting in modernizing China’s farm sector under Beijing’s five year plan. It also operates Lotus Supermarkets in Shanghai. However, acquiring 15 percent in the insurance company Charoen Pokphand Group would mark a major deviation from its core food business, such as poultry and animal feeding, but in turn will provide further solidarity to its 73 year old ties in China.
“I’m not sure what CP Group would do with the stake though. I was joking earlier that every Ping An shareholder will now get a bucket of fried chicken for their insurance policy.” Said Jim Antos, analyst at Mizuho Securities in Hong Kong.