HONG KONG: Manulife Financial Corp and Metlife are among the companies that have submitted first round bids for ING’s entire Asia life insurance business, sources said today, in what could be the largest Asia M&A insurance deal ever.
ING’s long awaited sale of Asian life insurance and the asset management units will help the Dutch bancassurer to partly repay the 3 billion euros (US$3.81 billion) of state aid plus the 50% premium it still owes the Dutch government.
The bids were submitted late on Friday and the indicative offers ranged from 6 to 7 billion euros (US$7.6-US$8.9 billion), according to one source with knowledge of the matter. Of the eight to 10 companies that sent offers, a shortlist will emerge by the end of May, the source said, adding that five bidders expressed interest for the whole Asia division while the rest sought parts of the business.
Still, some suitors have developed cold feet, as demonstrated by Samsung Life Insurance’s decision on Thursday to pull out of the race at the last minute. South Korea’s Kyobo Life has also dropped out, and it was also unclear whether Prudential Financial Corp took part in the first round.
Asian insurer AIA Group Ltd and Korea’s KB Financial Group also submitted first round bids, sources said. Korea Life Insurance Co, Canada’s Sun Life Financial Inc, and Switzerland’s Zurich Insurance Group, were also expected to submit offers.
US private equity fund J.C. Flowers & Co, TPG TPG.UL and Carlyle Group are among the buyout shops that have expressed interest, though they are expected to team up with a bidder to buy the Japanese business rather than bid on their own, sources said.
As part of the Asian divestment, ING received about 10 initial bids for its Asian asset management business this week. The asset management business, expected to fetch between US$500 million and US$600 million, is being sold separately.
ING had sent out more than a dozen information memorandums for its insurance business, which spans Southeast Asia and includes operations in Japan and South Korea. A winning bid by a larger insurer could introduce more competition into Asia’s rapidly growing life insurance market, currently dominated by AIA Group Ltd and British insurer Prudential plc.
ING’s Asian operations offer a platform for insurers keen to expand their Asian footprint and tap into the region’s rapid premium growth. Life insurance premiums in emerging Asia are forecast to grow at 9.5% this year and 8.7% next year, nearly three times the world average, according to Swiss Re estimates.
Most buyers are likely to place aggressive bids in the first round in order to advance to the second round. But the deal has its own challenges and not all bidders are keen to lay their hands on the entire Asian pie.
ING’s Southeast Asian operations are the most sought after, sources said. ING has indicated that it prefers bids for the whole Asian business, though it is allowing offers for three geographic regions: Southeast Asia, South Korea and Japan.
ING operates across seven Asian centres. Profits from its Asia-Pacific insurance operations rose 39% in the first quarter of 2012 from a year ago to 218 million euros (US$282.2 million), according to the latest company filings.
South Korea and Japan accounted for 77% of the profits while Malaysia accounted for 10%. Japan accounted for about 45% of Asia-Pacific’s underlying profit before tax, followed by South Korea and Malaysia.
For investment banks starved of IPOs and M&A deals, ING’s Asian divestment could provide a much needed boost. Bankers and lawyers stand to earn about US$100 million in fees if the deal is completed, some sources said.
By winning the sell-side mandate, Goldman Sachs and J.P. Morgan are best-placed to earn a slice of the fee pool. Their final payout will hinge on the structure of the deal and the final price among other factors.