Fortis and Ping An Insurance Company of China, Ltd. have signed a Memorandum of Understanding (MOU) to form a global asset management partnership.
Ping An intends to acquire a 50% equity stake in Fortis Investments the global asset management arm of Fortis, for a consideration of 2.15 billion. Through this partnership, Ping An would significantly advance its strategy to establish a global asset management business and a Qualified Domestic Institutional Investor platform while Fortis would significantly accelerate the development of its business in both China and Asia Pacific.
According to the MOU, Fortis Investments would be re-branded as Fortis Ping An Investments. Fortis Ping An Investments’ board will comprise twelve directors; that is six non-executive, two executive and four independents. Fortis and Ping An will each nominate three non-executive directors and propose two independents. The senior management of the company will remain unchanged and will benefit from the Asian expertise of key Ping An executives. The current strategy of Fortis Investments is fully supported by both shareholders.
The proposed transaction would create a unique asset management franchise with Fortis Ping An Investments benefiting from two sizeable home markets, the Benelux and China, while leveraging the obvious synergies and increased global scale brought by the integration of ABN AMRO Asset Management.
The partnership, with its world class combined industry expertise and product diversification, would benefit from focused knowledge sharing, including the mutual exchange of employees and the provision of consulting services. Both parties firmly believe that the partnership will result in both a higher long term growth rate and a greater quality and diversity of earnings. Fortis Ping An Investments will continue to be consolidated by Fortis.
Fortis Investments has approximately 23 million in CDO and CLO exposure as of 31 December 2007. Fortis has agreed to fully indemnify Ping An against any impairment in their value.
Last November, Ping An acquired a 4.18% equity stake in Fortis, which has subsequently been raised to 4.99%. Since then, both firms have explored several areas of potential business cooperation, with asset management taking priority.
“The proposed partnership is a unique and strong investment opportunity. It is perfectly aligned with Ping An’s long term development strategy and at the same time fully consistent with our requirements for financial investments. This acquisition will generate high financial returns and stable cash flows, and also allows Ping An to benefit from the rich brand heritage, the world-class management and industry know-how in running a diversified product offering, which have been cultivated by Fortis and ABN AMRO over decades,” says Peter Ma Mingzhe, chairman and CEO, Ping An.
“The creation of a global platform by combining Fortis Investments and the majority of the ABN AMRO Asset Management activities with Ping An is a unique opportunity to accelerate our growth plans for asset management, particularly within high growth markets such as China and elsewhere in Asia. We have consistently stated that to compete effectively in this sector at a global level requires both scale and expertise. Recent developments such as the acquisition of ABN AMRO and the creation of this important partnership with Ping An exemplify the extent of our global ambitions as a company,” adds Jean-Paul Votron, CEO, Fortis.
The transaction remains subject to final agreements and regulatory approvals. Merrill Lynch acted as exclusive financial adviser to Fortis. JPMorgan acted as exclusive financial adviser to Ping An.