ING Groep NV will sell insurance assets in Hong Kong, Macau and Thailand to Richard Li, a son of Asia’s richest man, for 1.64 billion euros ($2.14 billion) as local buyers seek to profit from the dismantling of one of Europe’s largest financial companies.
Pacific Century Group, controlled by Li, will buy the insurance and pension units in a sale that values the life businesses at 24.3 times estimated 2012 earnings and 1.9 times estimated book value of 865 million euros, according to a statement from ING today. Amsterdam-based ING said it’s expecting a net gain of about 1 billion euros from the sale.
For ING, which was forced to sell its entire insurance operations after Dutch bailouts in 2008-09, it’s the second disposal in Asia after agreeing to sell its Malaysian business to AIA Group Ltd. for $1.7 billion last week. ING must still sell insurance units in Japan and South Korea, where valuations will be lower given they are in slower-growing markets than those already sold, analysts say.
“This is another good deal,” said Dirk Peeters, a Brussels-based analyst at KBC Securities. “The question is, which assets will stick to ING’s fingers in the end? If you sell country by country, it’s logical the first parts fetch better prices.”
ING dropped 1.8 percent to 7 euros at 1:30 p.m. in Amsterdam, valuing the company at about 26.8 billion euros.
The shares are still up about 21 percent since the close on Aug. 29, when the company announced the sale of ING Direct Canada. That has outpaced the 8.2 percent gain in the 33-company Stoxx Europe 600 Insurance index over the same period.
Cheung Kong Holdings Ltd., the flagship company of Richard Li’s father, Li Ka-shing, fell 0.7 percent to 113.50 Hong Kong dollars.
HSBC Holdings Plc is advising Li on the ING deal. Goldman Sachs Group Inc. and JPMorgan Chase & Co. are advising ING.
The purchase by Li, 45, is the biggest insurance deal in Asia since Chow Tai Fook Nominee Ltd., controlled by billionaire Cheng Yu Tung, bought a $2.5 billion stake in Ping An Insurance Group Co. in March last year.
ING is required to sell its insurance and investment-management businesses before the end of 2013 after getting 10 billion euros of state aid during the financial crisis. While executing the imposed divestment program, ING is also selling banking assets to help speed up repayment of 4.5 billion euros it owes.
Deleveraging among a sample group of 58 European Union banks, including ING, has reached more than $600 billion from the third quarter of 2011 through the end of June, the International Monetary Fund said in a report earlier this month.
European banks may need to sell as much as $4.5 trillion in assets by the end of next year should policy makers fall short of pledges to stem the fiscal crisis, an increase from an estimated $3.8 trillion in April, the IMF said in a report published on its website last week.
In the last two months, ING announced an agreement to sell its Canadian online bank for $3.16 billion and disposed of its U.K. internet business and a 33 percent stake in China Merchants Fund, an investment-management joint venture. The company also raised about $3 billion last month by selling 54 million shares of Virginia-based Capital One Financial Corp.
The company’s Asian insurance and asset-management businesses had a combined book value of 6.6 billion euros at the end of June, the company said on Sept. 27.
ING said the sale process for its remaining insurance units in the region is continuing. The transaction announced today is expected to close in the first quarter, it said.
The Dutch company may have to sell its “mature, slow-growing” Korean unit at 0.8 times book value, JPMorgan analysts Michael Huttner and Ashik Musaddi said in a note today. That’s less than half the valuation for today’s deal.
ING’s entire Asian disposal plan may break even, the JPMorgan analysts said, even if the Japanese unit and its money-losing variable-annuity business are sold at half the book value of 2.1 billion euros.
Today’s deal follows Richard Li’s purchase of PineBridge Investments LLC, a $68 billion investment manager, from American International Group Inc. in 2010. Li’s Pacific Century Group completed the $500 million purchase as AIG sold assets to repay a $182.3 billion U.S. government bailout.
Li Ka-shing has pledged financial support for his youngest son’s ambitions.
“With the money from his dad, it’s sensible for Li to make more of these acquisitions going forward,” Benjamin Tam, who helps manage about $1.5 billion at IG Investment Ltd. in Hong Kong, said before the announcement. “He has personal passion for the financial industry and had exposure in the insurance sector.”
Richard Li sold his stake in Hong Kong insurer Pacific Century Insurance Holdings Ltd. to Fortis, the Belgian-Dutch financial-services company now called Ageas, in 2007.
As chairman of technology firm PCCW Ltd., Richard Li also runs HKT Trust and HKT Ltd., as well as property developer Pacific Century Premium Developments Ltd.