China's largest insurer by market value Ping An Insurance (Group) Co. is evaluating a bid for Prudential Plc's business in Asia, reported Bloomberg, citing people familiar with the matter.
Potential buyers will likely have to pay a premium to gain control. Prudential’s Asia business, including its asset management unit Eastspring Investments, could be valued at £40 billion (US$51.3 billion), said Barrie Cornes, Analyst, Panmure Gordon & Co, in a sum-of-the-parts estimate.
Deliberations are at an early stage and Britain’s largest insurer has not been approached by Ping An. But the Shenzhen-based insurer has reportedly sounded out the Chinese government on whether it would be supportive of a deal which would mark its biggest-ever acquisition by far, and discussed potential financing options with banks.
At the moment, the deal seems unlikely as Prudential CEO Mike Wells had said in a Bloomberg Television interview that the insurer is bullish on Asia and wouldn’t consider a sale of its business in the region. Asia generates about a third of its earnings and is where new demand for insurance is strongest given its highly under-penetrated, fast-growing market.
It reported first-half profit from its Asian operations soared 14% to £1.02 billion (US$1.3 billion) on a constant exchange rate basis, ahead of a spinoff that would separate its UK operations from faster-growing markets elsewhere.
Prudential shares rose as much as 4.4% in London, the most in four months, on news of Ping An’s interest.
With a $160 billion market capitalisation, Ping An trails only Berkshire Hathaway Inc in the industry. Its cash pile alone is larger than the market value of all but the world’s top five insurers. And according to Bloomberg data, the Chinese insurer had about US$81 billion of cash and equivalents as of 31 March.
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Ping An has been searching for new areas of growth, buying up stakes in listed companies including property developer China Fortune Land Development Co, and was part of a group that successfully delisted Qihoo 360 Technology Co from US markets in 2016 and relisted the company at several times its previous value in Shanghai.
In China where the market share of all foreign insurers remains low, Ping An could offer the prospect of a partnership that would give the company privileged entry to the market.
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