Bottom line: Fosun is prepared to up its latest bid for Club Med by another 20-30 percent, while Anbang needs to be careful in its investments to avoid ending up with a portfolio of overvalued, underperforming assets.
Two of China’s most active institutional investors are in the headlines today, led by a new sweetened bid from private equity giant Fosun International (HKEx: 656) as it competes with an Italian group to buy French vacation resort operator Club Med (Paris: CU). Meantime, another recently acquisitive investor Anbang Insurance is back in the headlines, with word that it’s boosted its stake in Minsheng Bank (HKEx: 1988 Shanghai: 600016), China’s oldest and largest privately owned lender.
Both of these deals reflect a growing assertiveness among Chinese institutional investors, which are looking for good places to park their billions of dollars in funds to achieve better returns. State-run companies like Anbang were traditionally highly restricted in where they could invest, with most stocks and overseas assets off-limits under rules imposed by Beijing. But those rules are being eased as these companies become more experienced investors and seek better-yielding assets than the sovereign bonds that were traditionally their largest holding.
As a private company, Fosun wasn’t limited by as many investing restrictions and has been one of China’s most aggressive overseas investors over the last 5 years. It first announced its deal to invest in Club Med a year and a half ago, joining a management-led group in a buyout offer for the company. The group bid 17 euros per share, in a deal that would have given Fosun 46 percent of the company and valued Club Med at 540 million euros. (previous post)
But the deal never closed because a group backed by Italian tycoon Andrea Bonomi made a counter bid, which has turned into a lively bidding war. In the latest news on that front, Fosun has just submitted a new sweetened bid of 24.60 euros per share, making the offer just hours before a deadline on Friday. The new bid, which values Club Med at 940 million euros, means Fosun would have to pay nearly 50 percent more than its original offer price if Bonomi decides to finally bow out of the bidding war.
Fosun’s founder Guo Guangchang clearly has his sights set on Club Med, and has big plans to help the operator expand in Asia and China if his plan succeeds. His plan looks quite logical, since China’s tourism market is expanding rapidly and Club Med’s resorts would find a big audience in China. Accordingly, I do expect that Guo is prepared to keep bidding for Club Med until Bonomi finally bows out, and Fosun is probably prepared to spend at least 20-30 percent more than its latest offer if the bidding war continues.
Next there’s Anbang, which was relatively unknown until October when it suddenly burst into the headlines with several high profile global purchases. The biggest of those was its plan to pay nearly $2 billion for the historic Waldorf Astoria hotel in New York. (previous post) Around the same time that deal was announced, media also reported Anbang was in talks to buy a major stake in South Korea’s Woori Bank, and to buy Belgian insurer Fidea. (previous post)
The latest reports have Anbang now turning its attention to its home China market, with the insurer recently boosting its stake in Minsheng Bank to 9 percent. (English article) Anbang has also boosted its stake another Shanghai-based bank, China Merchants Bank (HKEx: 3968; Shanghai: 600036), to 10 percent as of early December.
The spate of big investments come as Anbang itself is reportedly planning an IPO that could raise about $2 billion. Such an IPO could offer an interesting alternative to the limited field of publicly listed Chinese insurers, which tend to be quite conservative. But that said, Anbang may nees to be more cautious in its investments, or risk ending up with a portfolio of overvalued and underperforming assets.