Ping An’s Board Approves Acquisition Proposal for Shenzhen Development Bank

The board of directors of Ping An Insurance (Group) Company of China has approved the group's acquisition of Shenzhen Development Bank's 1.64 billion new shares through a private placement at a subscription price of 17.75 yuan (US$2.63) a share.

The subscription, which will be acquired with 7.83 billion shares, or a 90.75% stake of Ping An Bank Co. Ltd. that has been held by Ping An together with 2.69 billion yuan in cash, is subject to the approvals of shareholders of both companies and regulators, Ping An said in a statement.

"Upon completion of the transaction, net profit at the expanded SDB is expected to grow by 279% to approximately 3.85 billion yuan on a pro forma basis, while total assets will exceed 900 billion yuan. The number of credit cards will grow to 9 million, while net profit is expected to exceed 9 billion yuan by 2011," Ping An said.

The transaction "will help boost the banking business as a share of Ping An group's overall capital mix," the Chinese insurance group said.

As of June 30, 2010, Ping An Bank accounted for 22.3% of the group's total assets; that share will grow to more than 50% of the group's total assets upon completion of the transaction, Ping An said. The insurer said the bank contributed 912 million yuan, or 9.5% to the group's net profit in the first half of this year.

Following completion of the deal, Shenzhen-based Ping An will increase its stake in SDB from the current 29.99% to 52.38% and become the controlling shareholder of SDB, which will then become the controlling shareholder of Ping An Bank (BestWire, Sept. 2, 2010).

When the deal is completed, Ping An said, "SDB will be able to expand its services network to the Haixi Economic Zone where it currently does not have a presence, and become the fourth largest joint-stock commercial bank in China."

In addition, SDB will further enhance its credit card and retail and small and medium enterprise businesses by leveraging on Ping An's long-term capital support, sharing the group's customer base of more than 56 million retail clients and 2 million corporate clients, as well as its national distribution network and back office platform, Ping An said.

The group earlier said that SDB and Ping An Bank will look for viable ways to consolidate their operations after completing the deal.

"SDB will take steps at an appropriate time to consolidate the two banks through ways that are in compliance with current regulations including but not limited to the merger of Ping An Bank into its operation," Ping An said.

Ping An Bank, formerly known as Shenzhen Ping An Bank, was formed on June 16, 2007, after Shenzhen Commercial Bank merged with Ping An Bank. Shenzhen Ping An Bank Co. Ltd. was renamed as Ping An Bank Co. Ltd. with approval from the Shenzhen Municipal Administration of Industry and Commerce on Feb. 10, 2009.

As at June 30, Ping An Bank had registered capital of more than 8.62 billion yuan. It also has nine branches in Shenzhen, Shanghai, Fuzhou, Quanzhou, Xiamen, Hangzhou, Guangzhou, Dongguan and Huizhou, according to Ping An.

(By Rebecca Ng, Hong Kong news editor: Rebecca.Ng@ambest.com)