China approves HSBC sale of remaining $7.4 billion Ping An stake

Fri Feb 1, 2013 7:42am EST
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By Lawrence White

HONG KONG (Reuters) - China has approved the sale of HSBC's (HSBA.L: Quote) remaining $7.4 billion stake in Ping An Insurance (2318.HK: Quote) to a group controlled by Thailand's richest man, allowing completion of the biggest equity purchase in the country by a foreign investor.

For HSBC Holdings Plc (0005.HK: Quote), the sale marks its exit from a decade-long interest in China's second-biggest insurer and books it a $2.6 billion post-tax gain from selling what it no longer considers a core asset.

Approval by the China Insurance Regulatory Commission (CIRC) had been in doubt after media reports last month raised questions over Thai conglomerate CP Group's funding for the deal.

State-run China Development Bank (CDB) did not provide finance for the purchase, despite being lined up for funding last month, people familiar with the matter told Reuters.

One of the sources, who is familiar with CP Group but not authorized to speak publicly, said the CDB credit facility was still in place but CP is not drawing it down as it became such a politically sensitive issue, and it could complete the deal without it.

Charoen Pokphand Group (CP Group), controlled by septuagenarian billionaire Dhanin Chearavanont, bought HSBC's 15.6 percent stake in Ping An in December for $9.4 billion, agreeing to pay up front for around a fifth of that stake last month, and the rest, backed by CDB, on approval by the Chinese regulator.

Payment for the second $7.4 billion tranche of shares was made in cash, HSBC and CP Group said in separate statements. Last month HSBC had said the second tranche would be financed in part in cash and in part under a facility with CDB.

The first payment was supposed to be funded by wholly-owned CP subsidiaries, but local media reports said people not directly tied to the Thai food conglomerate were behind the deal, prompting CDB to voice its concerns. [ID:nL4N0AD33Z] The bank would likely not want to anger Beijing by being involved in facilitating a non-mainland investment in Chinese stocks.   Continued...

A woman rides a bicycle carrying her child past a car bearing the company logo of Ping An Insurance, in Hefei, Anhui province January 11, 2013. REUTERS/Stringer