HSBC buys stake in Vietnam insurer for $255 mln
HANOI - HSBC Holdings Plc , Europe's biggest bank, is paying about $255 million for 10 percent of Bao Viet to become the sole foreign investor in Vietnam's largest insurer, the companies said on Thursday.
The deal, which is the biggest ever insurance investment in Vietnam, comes after the British bank vowed to expand more aggressively in Asia and in insurance.
Under the terms of the deal HSBC will hold the stake for at least five years, during which time it has the option to buy another 8 percent from the Ministry of Finance and has additional pre-emptive rights to lift its stake to 25 percent and the prevailing foreign ownership limit thereafter.
Vietnam's insurance industry has grown rapidly in recent years, reflecting the country's robust growth of more than 8 percent in 2005 and 2006.
Bao Viet, formally known as the Vietnam Insurance Corporation, is also selling a 3.56 percent stake to state-run shipbuilder Vinashin for "about $90 million", the insurer's chairman, Le Quang Binh, said.
Bao Viet's share price in the two deals averaged about 71,900 dong ($4.40), company officials said. Dealers said that shares in the unlisted group are being traded at about 65,000 dong ($4) each on the unofficial markets.
HSBC will provide technical assistance to the Vietnamese company and "will elevate Bao Viet to a global level," Binh told a signing ceremony in Hanoi.
Clive Bannister, head of HSBC Insurance, said the deal was attractive due to the "extremely low" level of insurance penetration in Vietnam, its large population, and a market leading partner.
"We get in at the ground floor level an opportunity with a superb partner ... it gives us national coverage on day one," Bannister told Reuters.
He expected the bank to increase its stake to the allowed limit. "In our opinion it is sensible to have as much ownership as the regulations will allow," he said, adding he expected there to be a progressive liberalisation allowing more foreign ownership.
HSBC is aiming to double its insurance unit's share of group profits within five years, which should see it become one of the top 10 global insurers. The unit made $1.6 billion in the first half of this year.
Bao Viet's new registered capital would be 5.73 trillion dong ($354 million), Binh said.
"Bao Viet should have plans to list on the stock market in Vietnam and markets overseas as well," Finance Minister Vu Van Ninh said in a speech at the ceremony.
The Hanoi-based insurance group has said it plans to list on the Hanoi stock exchange by 2009.
It forecast net profit this year would climb 64 percent to 524 billion dong ($32 million) as it expands into banking, fund management and real estate.
Bao Viet had said it would offer 18 percent of its shares to foreign investors. The state retains a 77.54 percent stake.
Bao Viet has 126 branches and 400 sub-branches, 5,000 employees and 40,000 agents, and is the market leader in both life and general insurance in terms of premiums, HSBC said.
Revenue in the January-July period was more than 4.2 trillion dong -- or 58 percent of its 2007 target.
Non-life insurance premiums in the period rose 13 percent from the previous year to 1.26 trillion dong, while life insurance premiums firmed 5 percent to 1.87 trillion dong.
Credit Suisse advised on the deal between HSBC and Bao Viet. (Additional reporting by Ho Binh Minh and Steve Slater in London)
Reuters - September 13, 2007.
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