A little-known Chinese insurance company starts a quest to become the world's biggest hotel owner. It makes a bid to buy an American giant, cutting in on a deal almost sealed with a rival suitor. After a year of offer and counter-offer with the price now up to US$14 billion (S$19 billion), it suddenly and mysteriously walks away just when victory seems within its grasp.
The tale of Anbang Insurance Group and its tug of war for Starwood Hotels & Resorts with Marriott International has gripped the business world over the last few weeks. Here's how it all began.
In 2004, a provincial car insurer opens its first branch in China. Starting with just 500 million yuan in capital (or less than S$100 million then), its founding shareholders are said to include state-owned carmaker Shanghai Automotive Industries.
With its many layers of holding companies, not much else is known of Anbang's shareholders. What is known is its deep ties to the Chinese government and its revolutionary leaders. Its chairman and chief executive Wu Xiaohui is married to the granddaughter of Deng Xiaoping, China's paramount leader after Mao Zedong. China experts believe Mr Wu's political connections helped him bring in large investments.
Still, for 10 years, almost nothing is heard of Anbang outside of China.
Then in 2014, Anbang raises some 50 billion yuan (S$10.4 billion) through private financing, quintupling its registered capital to 62 billion yuan - more than even PICC and China Life, the biggest state-owned insurers. Its cash hoard balloons, thanks to a 38-fold increase in revenue from life-insurance premiums to 53 billion yuan.
Anbang is now ready for a great leap overseas.
These developments only increase the risk profile of Chinese buyers in the eyes of sellers because everyone is concerned about whether the Chinese can actually close deals.
THE HEAD OF ASIA FOR A BIG NEW YORK LAW FIRM IN HONG KONG, on the failed Starwood deal.
It buys New York's iconic Waldorf Astoria for US$1.95 billion from US private equity giant Blackstone. It is the largest-ever sale of a US hotel and the largest US real estate purchase by a Chinese buyer.
Last year, the overseas acquisition binge gathers speed. Anbang will spend more than US$18 billion (S$24 billion) on deals in just two years. It buys Dutch insurer Vivatv for €150 million (S$230 million) in cash, agreeing to inject up to €1 billion in new capital and take on €550 million of debt. It pays US$1 billion for a 57.5 per cent stake in South Korean insurer Tongyang Life and snaps up US insurer Fidelity & Guaranty Life for US$1.57 billion.
Back home, Anbang has been even busier, acquiring a 20 per cent stake in Minsheng Bank, China's biggest private lender, and significant holdings in other banks and property developers. By last year end, Anbang has 3,000 branches around China, 30,000 employees and more than US$114 billion in assets, according to its website.
On March 13, Blackstone agrees to sell Anbang another 16 landmark US hotels owned by its Strategic Hotels & Resorts for US$6.5 billion.
But just a day later, comes news of Anbang's boldest move - a US$13 billion bid for Starwood, owner of the Sheraton, St Regis and W Hotel brands.
Starwood had put itself up for sale last April, with Anbang quickly indicating its interest - only to back out when it could not explain how it would finance its offer. But Anbang returns on March 10 with partners in hand to trump a bid by Marriott.
What follows is three weeks of fast and furious "top this" until last Thursday, when Anbang abruptly walks away, even though Marriott had not topped its last offer.
A source quoted by the Financial Times said that high-flying "Chairman Wu got his wings clipped by the Chinese regulators". Chinese financial magazine Caixin said regulators planned to block both the Starwood and Blackstone deals using the rule that bars insurance companies from investing more than 15 per cent of their total assets abroad.
Others speculate that Beijing - which had encouraged companies to diversify and expand abroad - was worried about capital flight given that outflows have rattled China's currency and stock markets. Or perhaps Anbang could not get the financing needed for its final US$14 billion all-cash offer even though the secretive Mr Wu had earlier told reporters that the company had 1 trillion yuan in assets ready to deploy.
Anbang itself declined to explain, citing just "various market considerations". But its high-profile about-face has not just raised unanswered questions, it could cost Chinese companies some face.
"These developments only increase the risk profile of Chinese buyers in the eyes of sellers because everyone is concerned about whether the Chinese can actually close deals," the head of Asia for a big New York law firm in Hong Kong told FT.