Fosun and partners turned off AIA deal

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Fosun and partners turned off AIA deal

Source: Global Times
[09:05 August 16 2010]
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By Zhou Mi

A group of Chinese companies, including Shanghai-based Fo-sun, that joined together to buy stakes in insurance provider AIA's forthcoming initial pub-lic offering (IPO) are reconsid-ering its plan.

Fosun, the Shanghai-based private conglomerate with in-terests in pharmaceuticals, property development, steel, mining, retail, services and strategic investments worked with State-owned enterprises China Life Insurance and Chi-na Cinda Asset Management, as well as other partners, in planning the purchase.

However, the group is con-sidering withdrawing its bid for 30 percent of AIA's planned IPO in Hong Kong, 21st Cen-tury Business Herald reported on Friday.

The total value of the stock being offered in the IPO is be-tween 218 billion yuan ($32 billion) to 231 billion yuan ($34 billion), putting the 30 percent that Fosun and its partners planned to purchase at 65.4 bil-lion yuan ($9.6 billion) to 69.3 billion yuan ($10.2 billion).

China Life Insurance had earlier said that a reasonable value for AIA's total IPO would be between 170 billion yuan ($25 billion) and 184 billion yuan ($27 billion), the paper reported, citing unidentified sources familiar with the issue.

The practice of private and State-owned Chinese firms working together to purchase stakes in companies is get-ting more popular as a way of addressing the strengths and weaknesses of each kind of business, Xi Junyang, associate director of the Institute of Fi-nance and Economics Research at Shanghai University of Fi-nance and Economics, told the Global Times yesterday.

"State-owned firms have more opportunities to get the support of government, and have more capital resources," he said. "However, they gener-ally fall short when it comes to sensitivity to the market and quickly reacting to changes. This has been particularly ap-parent in past purchases of overseas interests in which Chi-nese firms have failed."

AIA's parent company, American International Group (AIG), was forced to continue soliciting buyers for AIA's IPO after an earlier deal with UK in-surer Prudential to buy the en-tire shares on offer fell through in June. Prudential wanted to cut the agreed price of 241 billion yuan ($35.5 billion) to about 204 billion yuan ($30 bil-lion), which AIG declined.

"As for the price, Chinese firms tend to be very prudent, which, in my opinion, they should be," Xi added