ING Groep NV (INGA) may break up its Asian life insurance operations and is holding talks with buyers interested in the business in different countries, two people with knowledge of the process said.
The company is currently in discussions with Manulife Financial Corp. (MFC) and AIA Group Ltd. (1299) for the Southeast Asian operations, and with both firms as well as KB Financial Group Inc. (105560) for those in South Korea, the people said, asking not to be identified because the talks are private. Two private equity funds have bid for the Japanese operations, they said.
ING, which had preferred to divest the business in a single sale, may generate higher proceeds by breaking up the unit, one person said. The company is seeking to sell the assets for 6 billion euros ($7.4 billion), with Southeast Asia accounting for about half of the proceeds, the person said. ING is aiming to sign sale agreements by the end of August, the person said.
Officials at ING, Manulife, AIA, and KB Financial declined to comment on the talks.
“Proceeds of 6 billion euros excluding the asset management business would be a positive, and ahead of market expectations,” said Hans Pluijgers, an Amsterdam-based analyst at Credit Agricole Cheuvreux SA. “Companies interested in buying parts overlapping their own business would be able to get more synergies, and that improves ING’s position to negotiate.”
Asset Management Unit
Pluijgers estimated ING could raise 6.5 billion euros to 7 billion euros from the divestments including the investment management unit and ING’s stake in an insurance joint venture in China. He expects the asset management unit may fetch around 500 million euros.
ING is also in talks with a consortium led by Mark Wilson, the former head of AIA. Backed by Blackstone Group LP (BX) and Swiss Re Ltd., Wilson bid for the entire Asia business, one person said. Richard Li, son of Hong Kong’s richest man, bid for ING’s operations in Southeast Asia and Japan, the person said.
Apollo Global Management LLC (APO) and J.C. Flowers & Co. are in talks for the Japanese business, two people said. Korea Life Insurance Co., which also bid for the Southeast Asian business, has not been officially engaged for talks yet, two people said.
Officials JC Flowers couldn’t immediately be reached for comment. Spokesmen for Korea Life, Blackstone, Apollo and Swiss Re declined to comment, as did a spokesman for Richard Li.
ING, led by Chief Executive Officer Jan Hommen, has to sell the insurance business globally before the end of 2013 to comply with conditions imposed by the European Union after the firm received state aid in 2008 and 2009.
South Korea and Japan, which accounted for a combined 79 percent of pretax profit last year, may fetch 1.95 billion euros and 1.16 billion euros respectively, Nomura Holdings Inc. (8604) analysts wrote in a May 2 note to clients. Malaysia, which contributed 17 percent to pretax profit, may result in 851 million euros in proceeds while rest of Asia may be sold for 1 billion euros, the research report said.
ING’s Asia insurance operations are primarily concentrated in South Korea, Japan and Malaysia, Nomura said. It also has smaller businesses in Hong Kong and Thailand. The current sale doesn’t include joint ventures in China and India, people familiar with the process have said.
ING’s variable annuity business in Japan, accounting for about half of the business there, would be most interesting for parties such as buyout firms that can combine it with other run- off books and thus significantly reduce costs, Cheuvreux’s Pluijgers said. Uncertainty on policy holder behavior decreases the business’s value, he said. ING’s Japanese variable annuity business, for which ING stopped selling policies in 2009, has a book value of about 200 million euros to 300 million euros, according to the analyst.
Closed variable annuities link payouts from life insurance retirement contracts to the performance of an investment portfolio.
The Dutch company is also selling its asset management business in Asia, which may fetch 319 million euros, according to Nomura’s report.
ING shares fell 0.52 percent in Amsterdam on Tuesday to 5.38 euros.
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