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Don’t stop shopping

10 November 2015 By Peter Thal Larsen

Chinese visitors spend freely in Western tourist destinations. For investment bankers, Anbang Insurance is the corporate equivalent. The Chinese group has just popped $1.6 billion U.S. insurer Fidelity & Guaranty Life into its basket to go with recent purchases in South Korea and the Benelux. Though its strategy is vague and funding opaque, sellers can count on Anbang to liven up any auction.

Few people outside China had heard of Anbang before the middle of 2014, when it forked out almost $2 billion to buy New York’s Waldorf Astoria hotel. Since then, it has swallowed financial groups in three continents. In the past twelve months alone it has taken control of Korean insurer Tong Yang Life, ailing Dutch group Vivat, and the Belgian banking operations of Delta Lloyd.

The agreed deal for Fidelity & Guaranty takes its total outlay to $4.4 billion. That’s close to 5 percent of the total spent by Chinese companies on overseas acquisitions in the period.

And those are just the successful deals: Anbang also failed to take control of Portugal’s Novo Banco, while the Korean government rebuffed the Chinese buyer’s offer for a stake in insurer Woori.

Quite what unites the Beijing-based group with its new subsidiaries in Seoul, Brussels, Utrecht and now Des Moines is unclear. Anbang will be Fidelity & Guaranty’s third owner in little more than five years, following UK-based insurer Old Mutual and hedge fund manager Phil Falcone’s Harbinger Group.

The privately owned Chinese group has said little about how it is funding its purchases. That won’t be much of a worry to Fidelity & Guaranty investors, who are getting a cash bid at a 20 percent premium to the share price in early April, before the company announced it was putting itself up for sale. Regulators, which must ensure that insurers deploy their cash reserves wisely, may be paying closer attention.

So far, countries have mostly welcomed Anbang’s shopping spree. The only setback was President Barack Obama’s decision to no longer stay at the Waldorf Astoria when he visits the Big Apple. Anbang’s website describes its strategy as “Win-win”. As long as it keeps spending, investment bankers and their overseas clients will happily agree.

 

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