Caixin
Dec 06, 2016 05:16 PM
BUSINESS & TECH

Fosun to Shed Insurance Unit for $3 Billion

Fosun International will sell its insurance subsidiary Ironshore Inc. for $3 billion, as China's largest private conglomerate tries to recover from a $15 billion overseas acquisition binge.

Shanghai-based Fosun will sell all its Ironshore shares to U.S. insurance company Liberty Mutual Group for about $3 billion, Fosun and Liberty Mutual announced Monday. The purchase price will be equivalent to 1.45 times Ironshore's tangible book value.

Liberty Mutual is one of the U.S.' largest property and casualty insurers. The sale is expected to be completed by mid-2017.

In 2014, Fosun spent $464 million on a 20% stake in Ironshore, a Bermuda insurer with operations in the U.S., and Fosun went on to buy the remaining 80% in May 2015, completing its acquisition of the insurance firm in a $1.84 billion deal.

Months later, the deal came under scrutiny from the Committee on Foreign Investment in the U.S. (CFIUS), an American government agency that vets foreign acquisitions in the U.S. for possible national security risks. CFIUS officials expressed concern about how Fosun would manage Ironshore subsidiary Wright & Co., which provides liability coverage to some U.S. government employees, including law enforcement officers.

Fosun eventually agreed to sell Wright & Co. to Starr Companies in order to appease CFIUS, Reuters reported.

Wright & Co. "accounted for only 2% of Ironshore's total business, and we were prepared to give up that portion," Fosun told Caixin earlier this year.

CFIUS has recently become increasingly wary of mergers and acquisitions of U.S. companies that involve Chinese firms. Earlier this year, CFIUS warned German chipmaker Aixtron SE, which has operations in the U.S., that its planned takeover by Fujian Grand Chip Investment Fund LP could compromise U.S. national security. U.S. President Barack Obama blocked the Aixtron deal last week.

However, the Ironshore sale "was a pure commercial decision and not because of any order from CFIUS or any other U.S. government agency," Fosun representatives told Caixin.

Fosun is in the process of streamlining its overseas investment portfolio, and plans to sell off up to $6 billion in assets, company executives told Bloomberg in August. After spending $15 billion on overseas acquisitions since 2010, which included French resort operator Club Méditerranée SA and U.K. travel firm Thomas Cook Group PLC, Fosun's debts had ballooned to 115 billion yuan ($16.7 billion) by late 2015.

In March, S&P's outlook on Fosun's BB-minus credit rating was lowered to negative.

CEO Liang Xinjun said in August that the company was shifting its focus toward "health, wealth and happiness," and that Fosun will continue to make acquisitions aimed at growing its insurance business.

Contact editor Ken Howe (kennethhowe@caixin.com)

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