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ING to Separate Banking and Insurance Operations
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| Copyright: | Datamonitor. All rights reserved | | Source: | Datamonitor | | Wordcount: | |
Oct 26, 2009 (Datamonitor via COMTEX) --
ING has reported that it will move towards a complete separation of its banking and insurance operations as part of its ongoing review of the group's strategy and as a logical next step in its back to basics program.
This is expected to be achieved over the next four years by a divestment of all insurance operations, including investment management. ING will reportedly explore all options, including initial public offerings, sales or combinations thereof.
ING's banking activities will be predominantly focused on Europe with selective growth options elsewhere. The insurance business will focus on its long-term structural leadership positions in life and retirement services. The business will be managed regionally, with key building blocks including the operations in the Benelux, US, Central Europe, Latin America and Asia.
ING has said that the negotiations with the European Commission (EC) on the restructuring plan have acted as a catalyst to accelerate the strategic decision to completely separate banking and insurance operations. These negotiations have been finalized and formal approval of the restructuring plan is expected before an extraordinary general meeting of shareholders, scheduled for November 25, 2009.
In order to get approval from the EC on its restructuring plan, ING needs to divest ING Direct USA by the end of 2013. It is anticipated that a divestment will take several years and will not be completed before the end of 2013.
Also as part of the restructuring plan, ING will create a new company in the Dutch retail market out of part of its current operations, by combining the Interadvies banking division and the existing consumer lending portfolio of ING Retail. This business, once separated, will be divested.
In conjunction with the restructuring plan filed with the EC, ING has reached an agreement with the Dutch government to alter the repayment terms of the core tier 1 securities, in order to facilitate early repayment. This early repayment option is valid until the end of January 2010.
ING intends to use this window of opportunity to repurchase E5 billion of core tier-1 securities in December 2009, financed by an underwritten rights issue.
Under the agreement, ING can repurchase the first E5 billion of the securities at the issue price plus a premium of up to approximately E950 million consisting of the accrued coupon and a repayment premium. The 8.5% coupon payment is estimated to be around E260 million at the time of repayment.
The repayment premium depends on the ING share price at the time of repayment. The premium has a minimum value of E333 million and increases if the ING share price at the time of repayment rises above E11.16. The premium is capped at E691 million corresponding with a share price of E12.40 or above.
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