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Biggest China Deal Brokered by Ma as HSBC Sold Ping An

Biggest China Deal Brokered by Ping An’s Ma as HSBC Sought Buyer
Peter Ma, chairman and chief executive officer of Ping An Insurance (Group) Co. Photographer: Jerome Favre/Bloomberg

HSBC Holdings Plc’s $9.4 billion sale of its stake in Ping An Insurance (Group) Co. to Thai billionaire Dhanin Chearavanont was initiated by the insurer’s chairman, the official who was approached to buy the stake said.

The disclosure is the first confirmation of the Chinese insurer’s role in brokering the transaction and highlights Ping An Chairman Peter Ma’s determination to find his own partner as HSBC looked to exit a decade-long investment.

Ma approached Tse Ping, vice chairman of Charoen Pokphand Group Co., about buying the stake, the Thai company executive said. Both are members of an advisory body to China’s legislature. Dhanin’s CP Group completed the deal, the largest sale of a Chinese company to a foreign buyer, on Feb. 6.

“Mr. Ma wanted a long-term investor so that Ping An’s share price doesn’t fluctuate too much,” Tse said in a Feb. 7 interview in Hong Kong. “Ping An is a good company --we like its culture and business model. That’s why we are willing to pay a good price for it.”

Ma’s role illustrates the influence exerted by Chinese executives over their investors and the importance of personal connections in closing a transaction that allowed London-based HSBC to reap a $2.6 billion profit. The deal survived a last-minute withdrawal of funding by China Development Bank Corp. and scrutiny by regulators in Beijing.

HSBC’s Search

HSBC spent months searching for potential buyers until Ma approached CP Group, whose main business is agriculture, Tse said, declining to elaborate on the discussions with Ma. Among those approached was Singapore’s Temasek Holdings Pte, Tse said.

Tan Yong Meng, a spokesman for Temasek, declined to comment, as did officials at Ping An and HSBC.

The deal has already yielded a $1.3 billion paper profit for Dhanin, who is Thailand’s second richest man with an estimated net worth of $6.6 billion, according to the Bloomberg Billionaires Index. About 55 percent of his fortune is from overseas private companies.

Questions about funding fueled concerns about the deal’s survival at times. Ping An shares fell the most in more than five months on Jan. 8, when Chinese magazine Caixin reported CDB had pulled financing after learning of the involvement of Xiao Jianhua, a Chinese financier, in the deal.

In an earlier report, Caixin said Xiao channeled funds from three municipal commercial banks that he reportedly controls to help CP Group purchase the Ping An shares. Xiao denied any involvement in the transaction in a Dec. 23 statement via his lawyer, Caixin reported.

Regulator’s Request

Tse said CDB didn’t give an explanation for withdrawing the funding. “We’ve known CDB for many years,” he said. “If they decide not to do something, they must have their reason.”

China Development Bank Spokesman Xu Fei wasn’t available to comment and CDB’s press office in Beijing didn’t immediately respond to a question about why CDB withheld funding for CP’s purchase of the Ping An shares.

Two days after Caixin’s January report, China’s insurance regulator asked Ping An to provide additional information on the transaction. The watchdog didn’t say what kind of information it requested.

The China Insurance Regulatory Commission approved the sale on Feb. 1, just hours ahead of a deadline. CP Group bought HSBC’s 15.6 percent stake for HK$59 a share. The stock closed yesterday at HK$67.40.

Honorary Title

Xiao was previously chairman of a CP Group unit called Chia Tai Worldwide Investment Co., according to Tse, who described the role as ceremonial rather than operational. Though Xiao had expressed interest in joining CP Group’s bid for the Ping An stake, the Thai company decided to do the deal without him, Tse said.

“Mr. Xiao worked with us on a few projects so he was using that chairman title,” said Tse. “He is no longer holding the position.” Tse didn’t say when Xiao relinquished the title. Xiao didn’t respond to an interview request made through his assistant.

Xiao was identified as chairman of Chia Tai Worldwide, or Zhengda Huanqiu in Chinese, as recently as July 2012 in pages that have subsequently been deleted from CP Group’s Chinese-language website. The web pages were located by Bloomberg News in December, before their deletion.

Stock exchange filings made by Ping An last year indicate CP Group began investing in the insurer while Xiao still held the title of Chia Tai Worldwide chairman.

Shanghai Stake

Like many large Chinese companies, Ping An has shares traded in both Hong Kong and Shanghai. The HSBC stake consists of Hong Kong-listed stock, also known as H shares.

In May, Ping An said Chia Tai Worldwide unit Linzhi Zhengda Global Investment Co. accumulated a 38 percent holding in Gongbujiangda Jiangnan Industrial Development Co., which owned 2.9 percent of the insurer’s Shanghai-traded shares. In December, Ping An said Linzhi Zhengda held 63 percent of Jiangnan Industrial.

Ping An in May said former board member Wang Liping had transferred part of the Jiangnan Industrial stake to Linzhi Zhengda. Jiangnan Industrial also held Ping An shares on behalf of top managers including Ma, according to the insurer’s interim earnings report.

CP Group will have three seats on Ping An’s board, Tse said. One of those will be taken by Soopakij Chearavanont, Dhanin’s son and the chairman of CP Lotus Corp., he said. Ping An has 16 board members, according its latest corporate filing.

The Thai conglomerate financed the Ping An deal itself, Tse said. HSBC used its own bankers for the sale, while UBS AG advised CP Group.

“Many large international banks offered to finance the deal but we decided to do it on our own,” he said.

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