China's Zhongtian Financial to buy up to $4.7 billion stake in Huaxia Life

SHANGHAI/BEIJING (Reuters) - China's Zhongtian Financial Group Co 000540.SZ, which has businesses in the real estate and finance sectors, said it planned to buy up to 25 percent of Huaxia Life Insurance for as much as 31.0 billion yuan ($4.7 billion).

Under framework agreements, Zhongtian will buy a stake of between 21 percent and 25 percent from two shareholders in cash, the Guiyang-based firm said in a filing late on Monday.

Zhongtian, which started out as a real estate developer in Guizhou province, has been actively expanding in the financial sector in recent years, with insurance and securities its top priorities. The Shenzhen-listed firm has a market value of 34.6 billion yuan, based on its last traded price in August.

“Zhongtian Financial’s total market value is just over 30 billion yuan, and they are considering paying over 30 billion yuan for this equity acquisition - that’s such a bold move,” said an M&A banker at a major Chinese lender.

Huaxia Life Insurance is part of conglomerate Tomorrow Holdings controlled by Chinese-born billionaire Xiao Jianhua. The size of Tomorrow’s stake in the life insurer is unclear.

Earlier this year, sources told Reuters that Tomorrow was planning to pare back its sprawling asset portfolio that included its stake in the unlisted Huaxia.

Zhongtian’s bid for a Huaxia stake gives the life insurer an overall valuation of 124 billion yuan.

The filing by Zhongtian, which also has interests in urban infrastructure and tourism projects, said the transaction would constitute a “major reorganization of assets”, adding that the specifics would be based on further due diligence and auditing.

Zhongtian said it would buy the stakes from Beijing Qianxi Shihao Electron Technology Co Ltd and Beijing Zhongsheng Century Technology Co Ltd, current holders of 20 percent and 13.41 percent stakes in Huaxia Life, respectively.

Zhongtian holds a 94.92 percent stake in ZTF Securities and a 36.36 percent in Zhongrong Life Insurance.

In July, Zhongtian said it planned to issue up to 8.0 billion yuan in commercial paper. A unit of the company and Zhongtian also planned to sell asset-backed securities worth up to 2.66 billion yuan.

Shares of Zhongtian on the Shenzhen bourse have been suspended since Aug. 21, pending the announcement of a plan related to an asset acquisition. They last traded at 7.350 yuan, up about 4 percent since the start of the year.

Huaxia grabbed headlines last year when regulators cracked down on high-yield, short-term investment products such as universal life insurance products.

Huaxia’s universal life insurance division recorded 138 billion yuan in premium income last year - 75 percent of its total business, official data shows.

In December, the insurance regulator suspended the firm’s online insurance business and barred it from seeking approval for new products for three months.

Reporting by John Ruwitch and Ryan Woo; Additional reporting be Engen Tham in SHANGHAI; Editing by Himani Sarkar