AIA, China Strategic among bidders for Bank of East Asia's life insurance unit: Sources

The companies have submitted binding bids for the asset, proceeding into the final stage of negotiations.
The companies have submitted binding bids for the asset, proceeding into the final stage of negotiations.ST PHOTO: KELVIN CHNG

HONG KONG (BLOOMBERG)- Hong Kong insurance giant AIA Group and China Strategic Holdings, an investment firm backed by billionaire Henry Cheng, are among final bidders for Bank of East Asia's (BEA) life insurance unit, according to people with knowledge of the matter.

The companies have submitted binding bids for the asset, proceeding into the final stage of negotiations, the people said, asking not to be identified because the deliberations are private.

BEA, which counts activist investor Paul Singer's Elliott Management as a shareholder, could raise about US$500 million (S$665 million) to US$600 million from a potential transaction, people familiar with the matter have said.

An announcement on the sale outcome could come as early as this month, the people said. Other bidders could emerge and talks could still be delayed or even fall apart, the people said.

China Strategic confirmed in an exchange filing that it has been selected as one of the shortlisted bidders and has submitted an offer, while representatives for AIA and BEA declined to comment.

Shares in China Strategic extended gains after the Bloomberg News report on Monday, and rose further by as much as 25 per cent on Tuesday in Hong Kong, their largest intra-day gain since Dec 29.

After closing higher on Monday, shares in BEA increased as much as 3.6 per cent on Tuesday while AIA declined as much as 1 per cent.

BEA in September started a process of selling its life insurance unit in a bid to boost profitability and lift its shares. As part of the deal, the Hong Kong-listed lender is also seeking to enter into a long-term exclusive distribution agreement that will provide an ongoing source of revenue as a distributor of insurance products through its platform.

Goldman Sachs Group has been helping BEA on the strategic review and potential sale of the asset.

BEA Life, the bank's wholly owned life insurance arm, had about HK$25.4 billion (S$4.36 billion) in assets as at the end of June, according to BEA's latest financial report. BEA's commission income from sales of BEA Life products increased by about 49 per cent in the first half of last year despite a drop in new premium income. BEA is scheduled to report its 2020 full-year earnings on Feb 24.

Founded in 1919, AIA is based in Hong Kong and has a presence in 18 markets. Its third-quarter new business value fell 28 per cent to US$706 million from a year earlier amid the impact from the coronavirus pandemic. It has a market value of about US$150 billion.

Listed in Hong Kong, China Strategic's operations range from investing in securities and loan financing to trading metal minerals and electronics components as well as securities brokerage, according to its website.

New World Development Chairman Henry Cheng holds about a 17 per cent stake in the company, according to data compiled by Bloomberg.

In 2010, China Strategic scrapped a joint offer for a majority stake in Nan Shan Life Insurance, held by American International Group, following a formal rejection notice from the Taiwan government.