HONG KONG (BLOOMBERG) - AIA Group is nearing a deal to buy the life insurance unit of Bank of East Asia, the Hong Kong-based lender whose shareholders include American billionaire hedge fund manager Paul Singer's Elliott Management Corp, according to sources familiar with the matter.
The insurance giant has emerged as the likely buyer for the assets after beating out other rivals, the sources said, asking not to be identified because the matter is private. A deal could be valued at about US$600 million (S$807.6 million) to US$700 million, the sources said.
Talks are in the advanced stage and an announcement could come as early as Wednesday, the sources said. Negotiations could still be delayed or fall apart, they added.
Representatives for AIA and Bank of East Asia declined to comment.
Shares in Bank of East Asia slipped 0.7 per cent in early Hong Kong trading on Wednesday (March 24), while AIA fell about 1 per cent.
A sale would be part of Bank of East Asia's efforts to boost profitability and lift its shares. The lender in September last year kicked off a process of divesting its life insurance unit and had attracted bidders including China Strategic Holdings, an investment firm backed by billionaire Henry Cheng, Bloomberg News reported last month. As part of the sale, the Hong Kong lender will also seek a long-term exclusive distribution agreement that could provide an ongoing source of revenue.
Bank of East Asia is one of the few remaining family-run banks in Hong Kong as the local lenders have been squeezed by larger competitors like HSBC Holdings and Bank of China. In 2009, China Merchants Bank bought Wing Lung Bank for about HK$17 billion (S$2.95 billion), while state-backed Yue Xiu Group completed acquiring a majority stake in Chong Hing Bank in 2014.
BEA Life, the bank's wholly-owned life insurance arm, grew its new premium income from whole life and annuity products by 9.5 times in 2020 from a year ago, according to the bank's latest financial report. That drove an 83 per cent increase in BEA's commission income from sales of life products.
AIA traces its roots to 1919 in Shanghai when American businessman Cornelius Vander Starr began an insurance business. The Hong Kong-based company is now one of the largest pan-Asian life insurers, with a presence in 18 markets including China, Thailand, Singapore and Australia. It had total assets of US$326 billion as at the end of December last year. It shares in Hong Kong have risen 57 per cent in the past year, giving the firm a market value of about US$150 billion.