HONG KONG/TOKYO Japan's Dai-ichi Life Insurance Co Ltd (8750.T) and Korea Life (088350.KS) were first out of the blocks to submit second-round bids on Monday for ING's (ING.AS) insurance operations in Southeast Asia, as the Dutch insurer moves to divest it Asian operations.
Binding bids for ING's Asian insurance and asset management operations are due on Monday and a wide range of suitors, from the son of Asia's richest man and a former rugby player in New Zealand to more established players including AIA Group (1299.HK) and Manulife Financial Corp (MFC.TO), are expected to place offers in a deal worth about $7 billion.
ING is selling its businesses in the region as it needs to repay a bail-out from the Dutch government during the 2008 financial crisis. Since the bail-out, ING has sold 15.2 billion euros ($18.6 billion) worth of assets around the world.
"Yes, Dai-ichi made an offer," one source with direct knowledge of the matter told Reuters. The source declined to be identified as the matter was not public.
Korea Life has also submitted bid for ING's a Southeast Asian operations, a South Korean report said on Monday.
ING's Southeast Asian business have been in hot demand, and the business could fetch about $2 billion, one person familiar with the matter previously told Reuters. Life insurance premiums in Southeast Asia are forecast to grow rapidly on the back of strong economic growth.
Dai-ichi and other Japanese insurers are under growing pressure to expand overseas as they face weak growth prospect at home.
A spokesman for Dai-ichi and Korea Life declined to comment.
KB Financial Group (105560.KS) submitted a bid for ING's South Korean insurance business, the local Maeil Business Newspaper reported.
ING chief executive Jan Hommen scrapped a joint IPO of its Europe and Asia units in favor of an Asian sale about six months ago. Since then, the worsening euro zone crisis has put some potential buyers off big M&A bets. Metlife (MET.N) and Prudential Financial Inc (PRU.N), considered strong contenders for ING's insurance business, have dropped out of the process.
ING's Southeast Asian operations were also expected to draw second-round bids for parts of the business from two other groups, sources familiar with the process said.
One consortium is led by ex-AIA CEO and a former rugby player Mark Wilson, backed by private equity firm Blackstone Group LP (BX.N) and Swiss Re SRENH.VX, while the other is headed by Richard Li, son of billionaire Li Ka-shing, which is likely to be interested only in the Hong Kong, Malaysia and Thailand businesses.
Wilson was in charge of AIA when it planned an initial public offering in 2009, but was replaced the following year after a failed bid for AIA by British insurer Prudential Plc (PRU.L).
There is some skepticism over either consortium having a chance of winning.
"It gets complicated when you bring a private equity fund into the picture," said Hong Kong-based Keefe, Bruyette & Woods insurance analyst Stanley Tsai. "They will need an exit strategy in the next two to three years, making the deal more difficult to execute from a regulatory standpoint."
ING's Southeast Asian operations could be sold at nearly two times embedded value, one source said. South Korea and Japan account for about two-thirds of ING's Asian business, but Japan may prove to be a stumbling block in the auction due to the 18 billion euros ($21.9 billion) worth of high-guarantee variable annuity policies the local operation has on its books.
The companies mentioned in this report either declined to comment or were not available for immediate comment.
Monday's binding bids could set the stage for a final round of negotiations, after which ING will decide whether to sell the life business en bloc or break it up and sell Japan, South Korea and Southeast Asia separately. ING has not set a reserve price, and CEO Hommen said in May that Asian divestments would probably fetch less than 8 billion euros.
Nomura Holdings is helping ING to find a solution for its Japanese operations, while Goldman Sachs (GS.N) and J.P. Morgan (JPM.N) are advising ING on the rest of the auction.
Manulife may bid for the entire Asian operation, while AIA is interested in South Korea and Southeast Asia, sources said. Though some sources said, the Canadian financial company could also skip Japan.
ING's Asia operations offer a platform for insurers keen to expand in a region enjoying rapid economic growth. Life insurance premiums in emerging Asia are forecast to grow 8.7 percent next year, nearly double the world average, according to Swiss Re estimates.
Binding bids for ING's asset management business are also due this week, with Nikko Asset Management, U.S.-based Principal Financial Group (PFG.N), Royal Bank of Canada (RY.TO), Singapore's United Overseas Bank (UOBH.SI) and Manulife expected to participate. The asset management sale is expected to fetch about $600 million.
($1 = 0.8208 euros)
(Additional reporting by Jung-yoon Lee; Reporting by Denny Thomas and Clare Baldwin and Taiga Uranaka; Editing by Ryan Woo and Alex Richardson)