Deals

Gillian Tan is a Bloomberg Gadfly columnist covering deals and private equity. She previously was a reporter for the Wall Street Journal. She is a qualified chartered accountant.

(Corrected )

China's Anbang Insurance Group is stretching the definition of time with its planned acquisition of U.S. insurer Fidelity & Guaranty Life.

It's been more than 10 weeks since the Beijing-based company withdrew its approval request with the New York Department of Financial Services for its $1.6 billion acquisition of the life insurer, saying it planned to refile "in the near future." The Wall Street Journal reported at the time that issues arose over the "sufficiency of answers" provided by Anbang about its ownership structure, relationships among shareholders and sources of funding.

Waiting Game
Anbang's deal for Fidelity & Guaranty Life has been pending for 277 days
Source: Bloomberg

 The life insurer's shareholders aren't overly optimistic about the situation, with FGL shares trading around $22.90 on Friday, a discount of almost 15 percent to Anbang's $26.80 offer. That discount was as much as 18.4 percent at the end of July. 

Investors are right to remain skeptical, even after HRG Group, FGL's biggest shareholder with a stake of roughly 80 percent, offered assurances this week. On an earnings call with analysts, HRG Chief Executive Officer Omar Asali had this to say:

"Closing FGL's transaction with Anbang remains a priority at HRG. While we won't comment in detail on the ongoing regulatory process, you should know that we are continuing to work closely with Anbang and are engaged with the regulators to secure the required approvals to complete this transaction."

Parental Guidance
HRG Group shares are at an all-time high despite the uncertainty surrounding the deal for Fidelity Guaranty & Life, in which it holds a controlling stake.l
Source: Bloomberg

The problem is, there's still a lack of clarity around timing. Anbang and FGL say they're seeking to close the deal as expeditiously as possible, but it all hangs on regulatory approval from Iowa and China, as well as New York. 

It also doesn't help that Anbang unexpectedly abandoned another recent acquisition target, Starwood Hotels, in a move that left market watchers questioning Chinese buyers more broadly. But FGL is a smaller, more logical fit. 

FGL, which has $18.9 billion in assets under management, has seen short interest peak in the past month at 16.5 percent of its free float. Those investors are hoping to profit if it the stock falls further, which is a near certainty if the deal collapses. 

Deal or No Deal
Investors are increasingly selling Fidelity Guaranty & Life's shares short
Source: Markit, Bloomberg

Unlike many transactions, there would be no termination fee to cushion the blow. In fact, FGL may even have to fork out $51.4 million, which has also been described as just $51 due to a typo in at least four FGL filings

FGL is trading at a discount to its peers and its own two-year average as a measure of price to book value, which may seem enticing. But investors hoping to make a quick buck from an Anbang takeover may want to settle in for a longer wait, if not brace themselves for disappointment.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

(Corrects reference to termination fee, which is payable by the target, in the penultimate paragraph.)

To contact the author of this story:
Gillian Tan in New York at gtan129@bloomberg.net

To contact the editor responsible for this story:
Beth Williams at bewilliams@bloomberg.net