Allianz Sells Half of Stake in Chinese Bancassurance Partner

German insurer Allianz S.E. [85014] said it sold about half of its stakes in Industrial and Commercial Bank of China to a group of investors through a private sale for HK$12.4 billion (US$1.6 billion).

The transaction was made after both parties “reaffirmed their strategic cooperative relationship” on March 25. According to Allianz, it has sold 3.2 billion ICBC Hong Kong-listed H shares to the select group of investors through a private sale, while it continues to hold 3.22 billion H shares in ICBC.

Christoph John, Allianz Asia Pacific’s Singapore-based spokesman told BestWeek Asia/Pacific that, “Allianz sold the stake at HK$3.86 per share. We therefore grossed HK$12.4 billion.”

After the sale, the total shareholding in ICBC by Allianz represents 0.97% of ICBC’s total outstanding shares and 3.87% of ICBC’s H shares, said the German insurer.

The original total shareholding in ICBC by Allianz was 1.93% of outstanding shares.

Triple-Win Situation

Market speculation had it that the move by Allianz was due to uncertainty created by the global financial crisis, or that the share price as well as the business performance of ICBC had not matched Allianz’s original expectations. But John did not refer to the financial crisis, saying only that the transaction favors all relevant parties.

“We have reached an agreement that is beneficial for all parties involved, for our partner ICBC, for the group of new investors, and also for Allianz. We believe that it is therefore a suitable moment to sell our stake,” said John.

When asked if the background of the investors are Chinese and/or Asian financial institutions, or Chinese-based venture capital, John declined to comment, claiming “the parties involved agreed not to disclose the names of the investors.”

ICBC earlier said in a statement that, pursuant to the shareholder rights agreement between ICBC and Allianz, a lock-up period for the H-shares held by Allianz will expire in two equal installments on April 28 and Oct. 20. Allianz will deal with the shares “in an appropriate way through close cooperation with ICBC,” the bank said.

The Chinese bank added, “in case of divestiture, Allianz will explore all potential methods of sale that would maximize value and minimize market impact, with a preference for a private sale to investors.”

Allianz’s decision has also raised market concerns as to whether the European insurance group would consider further disposals of of ICBC shares in the future. John said “it is much too early to say.”

He added the lock-up period for the second tranche ends on Oct. 20, and “we will decide with our partners in proper time.”

He also declined to comment on the group’s investment position on acquiring other financial-related H shares in 2009.

Strong Partnership

According to ICBC, in the past three years it and Allianz cooperated “positively” in various areas, including bancassurance product development, marketing, customer service and staff training.

ICBC’s chairman, Jiang Jianging, said in March when he introduced the arrangement of shares that would follow the lock-up period that the bank is “very satisfied” with the achievements that both parties made together in the past three years. He and the bank also viewed “bank-insurance cooperation a promising business for both.”

He added, “we look forward to further enhancing our long-term and mutually-beneficial strategic cooperative relationship.”

Allianz's chief executive officer, Michael Diekmann, said the group has “full confidence” in China’s economy, supports ICBC’s development strategy and recognize the long-term investment value that ICBC represents.

Diekmann said the insurance group “will further expand the strategic cooperation between the two institutions.”

By the end of 2008, the total value of bancassurance products that ICBC sold for Allianz “exceeded 3.2 billion yuan (US$469 million),” while the German insurer had 1.8 billion yuan in custodian assets in ICBC.

Another foreign financial institution, American Express, said has sold its 638.1 million ICBC H-shares, also to a selected group of investors through a private sale. The stake sold by American Express could be worth HK$1.22 billion, based on a sale price of HK$3.86 per share.

American Express said that, following the sale, it continues to hold 638.1 million H-shares, or a 0.2% stake in ICBC. The lock-up period for those remaining ICBC H-shares held by American Express will also expire on Oct. 20.

ICBC is the largest wholesale and retail bank in China by assets and deposits, offering commercial banking services to corporate and individual customers. By the end of 2008, it had total assets of 9.4 trillion yuan, and had about 16,000 outlets as well as 385,000 staff across China.

(By Rebecca Ng, Hong Kong news editor: [email protected])