China's Ping An aims to raise Fortis stake
AMSTERDAM (Reuters) - China's Ping An Insurance Co Ltd (2318.HK) wants to raise its stake in Fortis (FOR.BR) (FOR.AS) to 7 percent, to deepen its ties with the Belgian-Dutch financial group.
China's second-largest life insurer recently lifted its stake in Fortis to 4.99 percent from 4.18 percent and bought half of Fortis' asset management business for 2.15 billion euros ($3.4 billion).
"Ping An has declared that it ultimately wishes to obtain a 7 percent shareholding in Fortis, and Fortis has stated that it intends to explore possible means to that end," Fortis said in its annual report, made available on Monday.
Ping An bought its initial stake in Fortis for $2.7 billion in November, as Fortis raised funds for its acquisition of parts of Dutch rival ABN AMRO for 24 billion euros.
Chinese financial firms, flush with cash, have been seeking investments opportunities abroad to fuel growth and have done several deals as their western counterparts find themselves under pressure from the credit crisis.
"We believe we can cooperate successfully with this important player in a number of strategic and commercial areas in Asia, such as asset management and private banking," Fortis Chief Executive Jean-Paul Votron said in a statement.
With the asset management deal, Fortis got a much-needed cash injection to shore up its capital base, eroded by financing for the acquisition of ABN AMRO's Dutch operations and asset management unit as well as subprime-related writedowns.
Ping An will have to seek Fortis's approval to increase its stake beyond 5 percent and 7 percent, the annual report said. Ping An will also be able to increase its stake back to 4.99 percent if the shares are diluted.
As long as Ping An holds its stake in Fortis, it will be able to appoint one non-executive director to the board of the company, which is based in Brussels and Utrecht.
Votron said that Ping An Group President Louis Cheung Chi Yan will be nominated to a board seat. It will be voted on at Fortis' annual shareholders meeting on April 29.
The memorandum of understanding outlining the relationship with Ping An will be in effect for three years, during which Ping An will retain its stake in Fortis and also have the right to receive any favorable terms that Fortis extends to any other shareholders.
At 1041 GMT, Fortis shares were down 1.2 percent at 15.78 euros in Brussels, in line with the DJ Stoxx banking index .SX7P. The shares touched a four-year low of 12.82 euros earlier this month, hurt by ongoing worries over the global credit crisis.
ABN AMRO 2010
The annual report also said Fortis expects the integration of ABN to take until the end of 2010. Previously the group that acquired ABN AMRO -- Fortis, Royal Bank of Scotland (RBS.L) and Santander (SAN.MC) -- had said the split-up of ABN would last through 2009.
"Based on our own assessment and experience, we estimate that the entire transition and integration process may take up to three years, until the end of 2010," Votron said, adding that this was in line with Fortis' growth targets.
Fortis is targeting annual profit growth of 15 percent through 2011 and return on equity of 18.5 percent.
For 2007, Fortis' profit dropped by 8 percent to 4 billion euros, hurt by charges on its exposure to subprime debt, or mortgages to risky U.S. borrowers that went sour and triggered a global credit crisis that has caused billion of dollars in writedowns at major financial institutions and fund failures.
(Editing by Jason Neely and Erica Billingham)
