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Caixin

China resumes hunt for investors to take control of Anbang's remains

Consortium leader JD.com might see insurer's Beijing location as advantage

Six investor groups are in the running, sources say.   © Reuters

Dajia Insurance Group, the state-owned company created to take over the assets of fallen financial conglomerate Anbang Insurance Group, has resumed looking for new investors after last year's failed attempt during the pandemic, sources close to the company told Caixin.

Bringing in new investors for Dajia would bring Chinese authorities a step closer to putting Anbang's remaining assets into private hands. Currently, state-run bailout company China Insurance Security Fund holds a 98% stake in the company.

Six investor consortia are in the bidding, the sources said. Regulators have required Dajia to finalize the list of new investors by the end of August.

One consortium is being led by internet giant JD.com Inc. and Hopu Investment Management, a private equity giant headed by Fang Fenglei, a former Goldman Sachs banker, according to a document seen by Caixin. Another has been formed by private equity firm Primavera Capital Group and state-run investment company Xiamen International Financial Technology, which also participated in last year's bidding. Other potential buyers include online insurer ZhongAn Online P&C Insurance and state-owned automaker Chery Automobile.

The high-profile restructuring of Anbang, which started in February 2018 when it was taken over by the government, is widely seen as a template for how regulators will deal with debt-ridden companies considered too big to fail. Anbang, which had been led by now-imprisoned founder Wu Xiaohui, had posed unacceptable risks to the country's financial system through its reckless debt-fueled expansion, including a $1.95 billion purchase of New York's iconic Waldorf Astoria Hotel in 2015.

Its expansion caught the eye of regulators during a sweeping campaign to rein in "irrational" outbound investment. There were fears that soaring corporate debt could pose a systemic risk to the economy. When the government stepped in to run Anbang, the company was technically insolvent. At the end of June 2018, its total liabilities were 82.8 billion yuan ($12.8 billion) greater than its total assets, which at the time were valued at 3.2 trillion yuan, people with knowledge of the matter told Caixin previously.

As part of the restructuring plan, the government in June 2019 established Dajia, which absorbed Anbang's core insurance businesses with the goal of making them profitable so it could attract strategic investors.

It remains unclear how much of its holdings China Insurance Security Fund plans to sell, but its earlier failed attempt at offloading much of its stake in Dajia indicates that the government wants to put a majority of the company in private hands.

In June 2020, Dajia had accepted bids from two consortia to become new investors. One consisted of Primavera Capital Group and Xiamen International Financial Technology; the other included electronics giant TCL Technology Group Corp. But TCL later bowed out as some of Dajia's assets lost value during the pandemic. With one consortium committed to making an investment, China Insurance Security Fund would have still been left holding 63% of Dajia. The deal was then canceled because it wouldn't have turned Dajia into a privately controlled company, sources familiar with the matter said.

That wasn't the only obstacle. Xiamen International Financial Technology had proposed moving Dajia's headquarters to Xiamen, East China's Fujian province, but the idea was fiercely opposed by municipal government officials in Beijing, where Dajia is based, sources familiar with the matter said.

Under the latest plan, the consortium led by JD.com and Hopu Investment may see the tech giant's location in the capital as a competitive advantage. Their consortium proposed that JD.com initially take a 20% or 30% stake in Dajia, and gradually increase its holdings with the goal of eventually taking control of the company, the sources said, while Hopu can use its expertise to manage Dajia's business.

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Read also the original story.

Caixinglobal.com is the English-language online news portal of Chinese financial and business news media group Caixin. Nikkei recently agreed with the company to exchange articles in English.

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