UPDATE 1-Japan steps up SE Asia M&A as Meiji inks $700 mln Thai Life deal

Fri Jul 26, 2013 1:33am EDT

* Deal expected to close by end 2013

* Thai Life among nation's top three life insurers

* Deal is fourth Japanese financial sector deal in SE Asia in 2013

By Taiga Uranaka and Denny Thomas

TOKYO/HONG KONG, July 26 (Reuters) - Meiji Yasuda Life Insurance Co has agreed to pay about $700 million to buy a 15 percent stake Thai Life Insurance Co, underscoring the rising appetite of Japanese companies for deals in the rapidly expanding economies of Southeast.

Meiji Yasuda's purchase will make it the fourth financial services acquisition by a Japanese firm in Southeast Asia this year, bringing the year-to-date total value of Japanese M&A deals in the region to about $6.6 billion.

Rising personal income in Southeast Asia is giving, for the first time in many cases, individuals and families the ability to afford insurance. That new demand has boosted stock prices and corporate valuations, culminating in a spate of M&A transactions.

To tap into that growth, cashed-up Japanese insurers and banks have turned into aggressive buyers of Southeast Asian financial services companies as they battle sluggish growth in their home market.

Anna Tipping, a partner at law firm Norton Rose Fulbright, said the strong cash positions of Japanese companies and slower growth in the home market is encouraging them to pay top dollar for deals.

"It doesn't take much of a return on a new investment for the return to look very attractive in contrast to what the money is earning at home," Tipping added.

"This has meant that the Japanese can offer much higher purchase prices than the prices able to be offered by Western player who need a return on equity upwards of 15 percent to make the investment worthwhile," she added.

DEAL FLOWS

Earlier this month, Japan's biggest lender, Mitsubishi UFJ Financial Group (MUFG) agreed to pay $5.6 billion for a controlling stake in Thailand's Bank of Ayudhya. In May, Sumitomo Mitsui Financial Group agreed to acquire a $1.5 billion stake in Indonesia's BTPN.

Other insurance M&A deals expected in the region include PT Bank Negara Indonesia's planned sale of an up to 40 percent of its life insurance unit, a deal estimated at around $800 million. BNP Paribas is handling the sale.

Meiji and Thai Life announced the deal in separate statements on Friday without disclosing the deal's value. A separate source told Reuters that Meiji has agreed to pay about $700 million for the stake, confirming a Reuters report from last month.

Meiji Yasuda, Japan's second-largest life insurer by premium income after Nippon Life Insurance Co, beat Sumitomo Life Insurance Co to win the auction that also attracted private equity firms Carlyle Group LP, KKR & Co and CVC Capital Partners.

Thai Life, controlled by the Thailand's Chaiyawan family, is among the nation's top three life insurers, having earned 12.4 billion baht ($398.65 million) premiums in 2012, up 40 percent from last year.

The deal is expected to close by the end of the year.

Barclays advised Thai Life on the deal, Thai Life said in a statement. J.P. Morgan advised Meiji, sources previously told Reuters.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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