AIA, Manulife, others crunch numbers as final ING US$7bil bids loom

HONG KONG: A wide range of suitors, from the son of Asia's richest man and a former rugby player in New Zealand to more established players including AIA Group and Manulife Financial Corp, are expected to submit binding bids on Monday for ING Groep's Asia insurance business in a deal that could top US$7 billion.

ING is selling its Asian life insurance and its asset management units in the region as it needs to repay bail-out funds it received from the Dutch government during the 2008 financial crisis. Since the bail-out, ING has sold 15.2 billion euros ($18.6 billion) worth of assets around the world.

ING CEO Jan Hommen scrapped a joint IPO of ING's Europe and Asia units in favor of an Asia sale about six months ago. Since then, the worsening euro zone crisis has put some potential buyers off big M&A bets. Metlife and Prudential Financial Inc , considered strong contenders for ING's insurance business, have dropped out of the process.

ING's Southeast Asian operations have generated the most interest, with Japan's Dai-ichi Life Co Ltd <8750.T>, South Korea's KB Financial Group <105560.KS>, Korea Life Insurance Co Ltd <088350.KS> and two groups expected to submit second-round bids for parts of the business, sources familiar with the process said, declining to be identified because discussions were confidential.

One consortium is led by ex-AIA CEO and a former rugby player Mark Wilson, backed by private equity firm Blackstone Group LP and Swiss Re , while the other is headed by Richard Li, son of billionaire Li Ka-shing, which is likely to be interested only in the Hong Kong, Malaysia and Thailand businesses.

Wilson was in charge of AIA when it planned an initial public offering in 2009, but was replaced the following year after a failed bid for AIA by British insurer Prudential Plc .

There is some skepticism over either consortium having a chance of winning.

"It gets complicated when you bring a private equity fund into the picture," said Hong Kong-based Keefe, Bruyette & Woods insurance analyst Stanley Tsai. "They will need an exit strategy in the next two to three years, making the deal more difficult to execute from a regulatory standpoint."

ING's Southeast Asian operations alone may fetch about $2 billion and could be sold at nearly two times embedded value, one source said. South Korea and Japan account for about two-thirds of ING's Asian business, but Japan may prove to be a stumbling block in the auction due to the 18 billion euros ($21.9 billion) worth of high-guarantee variable annuity policies the local operation has on its books.

The companies mentioned in this report either declined to comment or were not available for immediate comment.

Monday's binding bids could set the stage for a final round of negotiations, after which ING will decide whether to sell the life business en bloc or break it up and sell Japan, South Korea and Southeast Asia separately. ING has not set a reserve price, and Hommen said in May that Asian divestments would probably fetch less than 8 billion euros.

Nomura Holdings is helping ING to find a solution for its Japanese operations, while Goldman Sachs and J.P. Morgan are advising ING on the rest of the auction.

Manulife may bid for the entire Asian operation, while AIA is interested in South Korea and Southeast Asia, sources said. Though some sources said, the Canadian financial company could also skip Japan.

ING's Asia operations offer a platform for insurers keen to expand in a region enjoying rapid economic growth. Life insurance premiums in emerging Asia are forecast to grow 8.7 percent next year, nearly double the world average, according to Swiss Re estimates.

Binding bids for ING's asset management business are also due this week, with Nikko Asset Management, U.S.-based Principal Financial Group , Royal Bank of Canada , Singapore's United Overseas Bank and Manulife expected to participate. The asset management sale is expected to fetch about $600 million. - Reuters