Feb 14, 2018 06:36 PM

Chinese Exchange Questions Listed Firm’s Ability to Acquire Greece’s Largest Insurer

A Shenzhen-listed Chinese property developer is in talks to acquire Greece’s largest insurer, but domestic exchange authorities are asking where the money will come from.

Rongfeng Holding Group Co. and affiliate Shanghai Gongbao Commercial Consulting Co. on Monday announced plans to acquire at least 75% of Ethniki Hellenic General Insurance S.A., Greece’s largest insurer.

Ethniki Hellenic, owned by the National Bank of Greece, was put up for sale in the first half of last year as part of a restructuring plan by the bank.

Rongfeng and Shanghai Gongbao’s net assets were approximately 600 million yuan ($95 million) and 2.44 billion yuan respectively in their most recent reporting year, but Ethniki Hellenic’s net assets are valued at 722 million euros ($890 million), according to a public document from the Shenzhen stock exchange published the same day as Rongfeng’s announcement.

The acquisition of 75% of the Greek insurer would cost 4.2 billion yuan, “far exceeding” the buyers’ net assets, said Shenzhen stock exchange authorities. The exchange asked for additional disclosures on Rongfeng’s ability to make the acquisition, its funding source, financing plans and channels, as well as potential risk.

Caixin learned from the secretary of the board of directors at Rongfeng on Tuesday that the company was busy preparing additional documents to respond to the request by the Shenzhen exchange.

Rongfeng and Shanghai Gongbao are both backed by businessman Sheng Yunan. Sheng has a 90% stake in Shanghai Gongbao, which itself holds an 80% stake in Shengshida Investment Co. Shengshida is the controlling shareholder of Rongfeng, with a 39.28% share in the Shenzhen-listed real estate developer.

Sheng Yunan’s son, Wang Zheng, is the chairman of the board of Rongfeng. Wang changed his name and took his mother’s surname after his parents divorced.

Rongfeng said that aim of the acquisition is to transform and develop their business. It cited a recovering Greek economy, relatively low insurance market penetration in Greece, and increasing purchases of life and health insurance following government cuts to public spending during the Greek financial crisis, as reasons for why the acquisition would be positive for Rongfeng.

Several Chinese companies have acquired overseas insurers in recent years. The relatively low financing cost of acquiring such companies and the difficulty of getting licenses in China are some of the reasons behind the trend, analysts told Caixin.

The Shenzhen stock exchange also asked Rongfeng to make public additional information on the “necessity of the acquisition,” including whether there are synergies with the company’s current business, and what preparations the firm has made in terms of personnel, technology, and management to enter a new industry, as well as any feasibility and market analysis.

Rongfeng, created in 2008 by putting real estate businesses under a shell company, has seen poor performance in recent years, as it has been unable to significantly increase land reserves and push through new projects. It posted negative net income in 2016 of 40.9 million yuan and negative net income of 23.5 million yuan in the first three quarters of last year.

Founded in 1891, Ethniki is Greece’s largest and oldest insurance company. It has 13 branches in Greece, and operations in Romania, Bulgaria and Cyprus.

As of end 2016, the company had total assets worth 3.33 billion euros, and net assets of 722 million euros. The company’s after tax profit was 43 million euros in 2016

Contact reporter Liu Xiao (

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