Caixin
Jul 10, 2021 03:16 PM
FINANCE

Exclusive: China Resumes Hunt for Investors to Take Control of Anbang’s Remains

Regulators have required Dajia to finalize the list of new investors by the end of August. Photo: Dajia
Regulators have required Dajia to finalize the list of new investors by the end of August. Photo: Dajia

Dajia Insurance Group Co. Ltd., the state-owned company created to take over the assets of fallen financial conglomerate Anbang Insurance Group Co. Ltd., has resumed looking for new investors after last year’s failed attempt during the pandemic, sources close to the company told Caixin.

Bringing in new investors for Dajia would bring Chinese authorities a step closer to putting Anbang’s remaining assets into private hands. Currently, state-run bailout fund firm China Insurance Security Fund Co. Ltd. holds a 98% stake in the company.

Six consortiums of investors are in the bidding, the sources said. Regulators have required Dajia to finalize the list of new investors by the end of August.

One consortium is being led by internet giant JD.com Inc. and Hopu Investment Management Co. Ltd., a private equity giant headed by Fang Fenglei, a former Goldman Sachs banker, according to a document seen by Caixin. Another consortium has been formed by private equity firm Primavera Capital Group and state-run investment firm Xiamen International Financial Technology Co. Ltd., which also participated in last year’s bidding. Other potential buyers include online insurer ZhongAn Online P&C Insurance Co. Ltd. and state-owned automaker Chery Automobile Co. Ltd.

The high-profile restructuring of Anbang, which started in February 2018 when it was taken over by the government, is widely seen as a template for how regulators will deal with the country’s debt-ridden companies that are considered too big to fail. Anbang, which had been led by its now-imprisoned founder Wu Xiaohui, had posed unacceptable risks to the country’s financial system through its reckless debt-fueled expansion, including a $1.95 billion purchase of New York’s iconic Waldorf Astoria Hotel in 2015.

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Its expansion caught the eye of regulators during a sweeping campaign to rein in “irrational” outbound investment amid fears that soaring corporate debt could pose a systemic risk to the economy. When the government stepped in to run Anbang, the company was technically insolvent. As of end-June 2018, its total liabilities were 82.8 billion yuan ($12.8 billion) greater than its total assets, which at the time were valued at 3.2 trillion yuan, people with knowledge of the matter told Caixin previously.

As part of the restructuring plan, the government in June 2019 established Dajia, which absorbed Anbang’s core insurance businesses with the goal of making them profitable again so it could attract strategic investors.

It remains unclear how much of its holdings China Insurance Security Fund plans to sell, but its earlier failed attempt at offloading much of its stake in Dajia indicates that the government wants to put a majority of the company in private hands.

In June 2020, Dajia had accepted bids from two consortiums to become new investors — one consisting of Primavera Capital Group and Xiamen International Financial Technology, and another included electronics giant TCL Technology Group Corp. But TCL later bowed out of the deal, as some of Dajia’s assets ended up losing value during the pandemic. With just one consortium committed to making an investment, China Insurance Security Fund would have still been left holding 63% of Dajia. The deal was then canceled because it wouldn’t have turned Dajia into a privately controlled company, sources familiar with the deal said.

And that wasn’t the only obstacle to last year’s plan. Xiamen International Financial Technology had proposed moving Dajia’s headquarters to Xiamen, East China’s Fujian province, but the idea was fiercely opposed by municipal government officials in Beijing, where Dajia is based, sources familiar with the matter said.

Under the latest plan, the consortium led by JD.com and Hopu Investment may see the tech giant’s location in the capital as a competitive advantage. Their consortium proposed that JD.com initially take a 20% or 30% stake in Dajia, and gradually increase its holdings with the goal of eventually taking control of the company, the sources said, while Hopu can use its expertise to manage Dajia’s business.

Contact reporter Tang Ziyi (ziyitang@caixin.com) and editor Michael Bellart (michaelbellart@caixin.com)

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