Sunday, November 19, 2017

Allianz rebuffs Chinese takeover

It emerged this week that Chinese groups Anbang and HNA both attempted a takeover of Allianz earlier this year.

The two companies made separate approaches about buying controlling stakes in Germany’s biggest insurer, according to reporting from Sueddeutsche Zeitung and Reuters. HNA was apparently also willing to consider a minority stake. Allianz reportedly showed little interest in the advances.

Valued at US$100 billion, the German company is one of nine insurers considered to be of global systemic importance, while Anbang is a Beijing property insurer founded in 2004 and HNA is a conglomerate founded in 2000 as the parent of Hainan Airlines.

However, both Chinese companies have grown significantly in recent years and have made headlines around the world with a number of marquee acquisitions.

Anbang paid US$2 billion to purchase New York’s Waldorf Astoria hotel, made a US$6.5 billion acquisition of Strategic Hotels & Resorts and launched an unsuccessful US$14 billion bid for Starwood Hotels & Resorts — and even became embroiled in a controversy surrounding Donald Trump over a rumoured US$400 million investment in a New York office tower owned in part by the US president’s son-in-law, Jared Kushner.

In the insurance sector, Anbang bought Fidea in Belgium and US life insurer Fidelity & Guaranty Life, and its contact with Allianz may have originated with the acquisition of the German insurer’s Korean life insurance and investment arms last year for US$216 million.

HNA has been even more acquisitive, spending US$50 billion on acquisitions in the past few years, including stakes in Deutsche Bank and Hilton Worldwide, and a US$6 billion takeover of Ingram Micro.

Although Chinese authorities have aggressively cracked down on such deals recently, reporting by Sueddeutsche Zeitung speculates that restrictions may be eased after the National Congress of the Communist Party of China in October, opening the door for a renewed effort by the Chinese groups.

That seems unlikely. The regulatory and political hurdles would be significant, both in China and Germany. Anbang’s former chairman Wu Xiaohui was detained by authorities and forced to step down earlier this year. It is still not clear why, but Germany’s financial supervisory authority, Bafin, would undoubtedly want to know more before allowing the company to buy even a minority position in one of the commanding heights of the German economy.

Indeed, the situation is reminiscent of Fosun’s attempted takeover of an Israeli insurer, which was derailed when its chairman and controlling shareholder, Guo Guangchang, was detained by authorities. Market participants in Israel said at the time that the country’s capital markets regulator had long been keen to block the deal on concerns that Chinese owners would be difficult to regulate.

Such concerns have already emerged in Germany around HNA’s equity position in Deutsche Bank. The Chinese group increased its stake to 9.9% in May, making it the biggest direct shareholder. Even though the stake is below the 10% threshold for automatic review, Bafin and the EU banking watchdog were rumoured in July to be preparing an investigation into whether HNA is a fit and proper owner of such a large stake.

However, the issue of Chinese takeovers has been a political concern in Germany since long before HNA’s move, growing particularly loud after Chinese white-goods company Midea bought German robot-maker Kuka.

Despite China’s own crackdown on overseas acquisitions, the ministry of foreign affairs nevertheless came out in defence of Chinese acquirers in July in response to the hardening mood in Germany.

“We have said many times that the nature of the economic and trade cooperation with Germany and other countries is mutually beneficial and win-win,” said a spokesman. “We hope that, when introducing relevant measures, Germany and the EU can avoid being affected by protectionism and sending chaotic and negative messages to the outside world.”

It remains to be seen if either Anbang or HNA will revive their bids after October, but as one Allianz investor told Sueddeutsche Zeitung: “If HNA or Anbang makes the other shareholders a truly attractive offer, it would be difficult for Allianz leadership to simply say no.”

Even if such an offer doesn’t materialise, it may only be a matter of time before China buys one of the world’s top insurers.

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