Chinese authorities have asked Anbang, the insurer whose chairman was allegedly detained in June, to sell its overseas assets, newswire Bloomberg reported this week.
Citing people familiar with the matter, Bloomberg reported that the Chinese government has also asked Anbang to bring the proceeds back to China after disposing of holdings abroad.
Anbang has been one of the most aggressive Chinese buyers of international real estate in recent years, while its international cross-sector M&A activity amounts to more than $30 bn (€27 bn) since 2014.
Of that, some €7 bn has gone towards US and European property deals, the most recent being the acquisition of the DoubleTree by Hilton hotel in Amsterdam for €350 mln from Blackstone – apparently Anbang’s go-to vendor for property. This transaction was preceded in October 2014 by its acquisition of the landmark Waldorf Astoria in New York (pictured) for almost $2 bn, a record for a single American hotel.
According to a WeChat message by Anbang, cited by Bloomberg, the insurer has no plans to sell its overseas assets. ‘Currently, Anbang’s various businesses and operations are all normal, and the company has ample cash and sufficient solvency capabilities.’
The news about the Chinese government crackdown follows the disappearance of Anbang’s chairman Wu Xiaohui in June. A local magazine reported earlier that Wu had been detained and was assisting an official investigation. He has not been seen publicly since. Anbang issued a statement on 14 June saying the chairman was ‘unable to fulfil his role for personal reasons’.
Senior executives, the statement added, continue to run the business, ‘which is operating as normal’. Nevertheless, market watchers have expressed concern the investigation into Anbang could reverberate through the country’s financial sector. And this might jeopardise growing Chinese capital outflows, which yielded almost $300 bn of overseas M&A deals in 2016 alone.
FIVE KEY QUESTIONS
What is Anbang?
Wu Xiaohui created Anbang Property & Casualty in 2004. Since then it has become a global insurance company with 30,000 employees and 35 million customers worldwide. Its business covers life insurance, property and casualty insurance, health insurance, pension insurance, banking and asset management. The group claims to have total assets of nearly RMB 2 tln (€259 bn).
When was its international debut?
Anbang’s modest share of the Chinese insurance and investment industry has grown to anywhere from 6% to 19%, depending on which annual ranking or company statement one consults. The business really launched itself as a standard-bearer for Chinese international ambitions in 2014 with an audacious real estate deal – the $2 bn acquisition of the Waldorf Astoria hotel in New York from US private equity group Blackstone. Hotels have been an important theme since. Anbang carried out the second largest Chinese investment in the US in 2016 when it acquired the Strategic Hotels & Resorts group from Blackstone for $6 bn. This followed its $14 bn offer for Starwood Hotels, which launched a bidding war in which it was trumped by Marriott’s $12 bn buyout. Anbang also sought to develop its US holdings by acquiring a $400 mln stake in a Manhattan skyscraper in a deal with Jared Kushner, son-in-law to Donald Trump. Following the latter’s election to the US presidency the potential deal was dropped.
Which European market does it favour?
Last May’s €350 mln Amsterdam Doubletree by Hilton purchase occurred seven months after the insurer’s first Dutch real estate deal, the acquisition of five office properties in Amsterdam, Rotterdam and The Hague. Demand for office space, and accordingly pricing, is rising in the Netherlands due to improving economic conditions. Yet some were surprised at unconfirmed reports that Anbang paid €500 mln for the portfolio, which Blackstone had bought at the trough of the property cycle in 2013 for €165 mln.
How does Anbang operate?
This is a key question that authorities in China are now believed to be investigating. The investment capital presumably starts with the premiums Anbang charges for its insurance products. But Anbang has been faulted for not publishing audited financial statements or disclosing the identity of its shareholders or directors.
Surely the situation is better in Europe?
Anbang’s initial entry into the European arena has flowed from its core business of insurance, a sector tightly regulated by the financial authorities. Anbang acquired Belgian insurance company FIDEA and Delta Lloyd bank in 2014. The following year Anbang helped the Dutch government out of a property-inspired headache when it acquired insurer Vivat for a symbolic €1, €85 mln in back taxes and a €1.3 bn capital injection. Vivat was the ‘Reaal’ in Dutch bank-insurer group SNS Reaal which had been nationalised two years before to prevent it collapsing under the weight of huge losses on the bank’s real estate lending portfolio. Vivat has stepped back into real estate as the conduit for Anbang’s office transaction with Blackstone.
Dutch media are already speculating that the troubles at Anbang could filter over into Vivat, endangering its relaunch. The prognosis is not great all round and Anbang may no longer be a byword for ‘peace and stability’ – its meaning in Mandarin.
