Caixin
Apr 18, 2017 03:54 AM
M&A

Anbang Likely to Drop $1.6 Billion Fidelity & Guaranty Life Purchase

Beijing-based Anbang faces yet another setback in push to buy assets in the U.S. Photo: Visual China
Beijing-based Anbang faces yet another setback in push to buy assets in the U.S. Photo: Visual China

(Washington, D.C.) — Anbang Insurance, one of China's most acquisitive overseas dealmakers, faces another setback in the U.S. as its $1.6 billion bid for Fidelity & Guaranty Life missed a Monday deadline for completion.

The purchase of the annuities and life insurance company stalled when state financial regulators in New York and Iowa didn’t grant needed approvals. When initially arranged in November 2015, the transaction was scheduled to close in November 2016 but was postponed three times until April 17 because of regulatory delays.

Beijing-based Anbang has been one of the most aggressive Chinese purchasers of overseas assets, making tens of billions of dollars in deals over the past couple of years, including the $1.95 billion purchase New York’s landmark Waldorf Astoria hotel in 2014.

But the company has encountered recent setbacks. Last month, Kushner Companies, the real estate firm previously headed by U.S. President Donald Trump's son-in-law, scrapped talks with Anbang to redevelop its flagship New York office tower. In March 2016, Anbang withdrew a $14 billion bid for Starwood Hotels & Resorts Worldwide Inc., citing “various market considerations.”

The Fidelity & Guaranty Life transaction won clearance last March from the Committee on Foreign Investment in the United States, a U.S. government panel that scrutinizes deals for potential national security concerns. The deal ran into problems with regulators in New York and Iowa, where FGL’s business is based.

According to a regulatory filing by FGL, Anbang withdrew an application to the New York state financial regulator last May after the regulator sought additional materials about the Chinese company.

A source close to the deal said the New York State Department of Financial Services asked Anbang to provide more detailed information about its shareholding structure and major shareholders. But Anbang failed to provide the information. The financial services department also contacted China’s insurance regulator for information about Anbang but didn’t get what it demanded, according to the source.

Without New York’s approval, it was almost impossible for the deal to proceed, the source said.

Approval of the deal also stalled in Iowa. FGL had agreed to extend the expiration of the merger to May 31 if Anbang secured a public hearing with Iowa’s financial regulator by April 17. But no such hearing has been announced.

FGL said in February that it would solicit other bids as it extended the agreement with Anbang. The source close to the deal said negotiations between FGL and other potential buyers have begun.

Anbang has not responded to questions from Caixin.

Established in 2004 with 500 million yuan ($72.7 million) in registered capital from seven shareholders, Anbang grew explosively, thanks for booming sales of short-term, high-yield policies, which became the target of a government crackdown late last year.

According to the company Website, Anbang’s assets, including several insurance subsidiaries and stock in a number of financial institutions, total more than 1.9 trillion yuan. As of 2015, the company’s registered capital had ballooned to 61.9 billion yuan, held by 39 shareholders, according to company documents.

Company documents obtained by Caixin showed that the company’s equity is evenly distributed among the 39 shareholders, with most of them owning 2% to 3% stakes. A Caixin investigation in 2015 found that many Anbang shareholders have links to company chairman Wu Xiaohui

Contact reporter Han Wei (weihan@caixin.com)

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