Ageas SA will sell its Hong Kong life insurance unit to China’s JD Capital in its largest divestiture since the collapse of predecessor Fortis in 2008 as it seeks to boost shareholder returns and expand elsewhere. The shares surged.
JD Capital, also known as Beijing Tongchuang Jiuding Investment Management Co., will pay HK$10.7 billion ($1.38 billion) for the local life insurance business, Brussels-based Ageas said in a statement Sunday. That’s about 1.27 times book value and will generate a gain of about 450 million euros ($500 million) upon closing, based on figures at the end of June, the company said.
The sale of the Hong Kong business, its only fully owned unit in Asia, will allow Ageas to expand faster-growing partnerships in the region and generates additional cash for acquisitions or increased distributions to shareholders. Ageas owns 24.9 percent of China’s Taiping Life Insurance Co. and holds minority stakes in partnerships in Thailand and Malaysia. The insurer is also about to start operations in Vietnam and the Philippines through joint ventures with local banks.
“We believe this is a good price for the Hong Kong operation, considering the tough equity market in Asia,” Benoit Petrarque, an analyst at Kepler Cheuvreux in Amsterdam who recommends investors sell the shares, said in an e-mailed report to clients. “The transaction will have a positive impact on the net cash position.”
Ageas rose as much as 3.8 percent in Brussels trading, the biggest increase since November. The stock was at 36.91 euros, or 2.9 percent higher, at 9:45 a.m. local time, bringing the gain this year to 25 percent.
Ageas first acquired a stake in the Hong Kong insurer in 2007 from Richard Li, whose Pacific Century Group agreed to pay $2.14 billion for Amsterdam-based ING Groep’s life insurance units in Hong Kong, Macau and Thailand three years ago. That transaction valued the businesses at about 1.9 times book value, ING said at the time.
Ageas’s life reserves in Hong Kong decreased to 3.1 billion euros at the end of June from 3.3 billion euros in the prior quarter. Customer inflows fell 3 percent in local currency in the six months through June.
The transaction, scheduled to be completed in the first half of 2016, is JD Capital’s first insurance acquisition. The deal will be subject to regulatory approvals, closing adjustments and shareholder approval at JD Capital, which is backed by Singapore’s Temasek Holdings Pte and Germany’s Allianz SE.
Citigroup Inc. advised JD Capital on the deal, according to people familiar with the matter. Morgan Stanley worked with Ageas, the people said, asking not to be identified as the information is private.