By Yvonne Lee
HONG KONG-- Fosun International Ltd., owner of One Chase
Manhattan Plaza in downtown Manhattan, is planning to spend at
least $2.4 billion to buy five insurers in the U.S., Europe and
Asia this year, as the giant Shanghai conglomerate ramps up
overseas acquisitions.
In an interview with The Wall Street Journal, Fosun Chief
Executive Liang Xinjun said insurers are attractive because of
their pools of capital, collected as premiums, which can be
invested to seek high returns.
Many Western insurers are also cheap, Mr. Liang said, trading at
around one time book value, compared with the 2.4 times for their
counterparts in China. The low interest-rate environment globally
has hurt the profitability of some western insurers, who earn a
large portion of their income by investing in bonds.
"Insurance is the most important business segment for us--the
build-out of insurance gives us a cheap and sustainable source of
funding," said Mr. Liang, who is one of Fosun's four founders. "The
persistent low interest rate environment in the U.S. and Europe has
made the acquisition targets there look more attractive."
Fosun is in exclusive negotiations to purchase five different
insurance companies, and the company's due diligence efforts have
been completed on those targets, Mr. Liang said. He declined to
name the companies.
One immediate target in its sights, according to a person
familiar with Fosun's strategy, is Israeli insurer Phoenix Holdings
Ltd. Fosun is close to buying a major stake in the company for
about $500 million, that person said, and negotiations are expected
to be completed in June.
Owned by Delek Group Ltd., an Israeli conglomerate controlled by
billionaire Yitzhak Tshuva, Phoenix has about $12.5 billion worth
of assets, according to its website. Phoenix couldn't immediately
be reached for comment.
Phoenix would be the latest deal in the multibillion-dollar
overseas acquisition spree that Fosun kicked off in 2010, when it
bought a small stake in French resort operator Club Méditerranée
SA. This year, the conglomerate came full circle when it bought out
Club Med after a year-long bidding battle.
Its largest purchase so far, according to Dealogic, has been
Fidelidade Group, Portugal's largest insurance company, which it
bought for $1.5 billion last year. It also bought a 20% stake in
U.S. insurer Ironshore for about $463.8 million last year.
In anchoring its business to insurance, a source of cheap and
stable funding, Fosun hopes it can replicate a model pioneered by
Warren Buffett's Berkshire Hathaway Inc.
Last year, net profit from Fosun's insurance business, which
includes life and property insurers in China, the Portuguese
insurance asset and others, more than doubled from a year earlier
to 1.1 billion yuan ($177.1 million), contributing 17% of the
company's total net profit. By December, insurance assets under
Fosun's management were worth about $18 billion.
The company, which was founded in 1994 by four Fudan University
graduates, including billionaire chairman Guo Guangchang and Mr.
Liang, initially sought to sell medical equipment. The company now
operates a range of businesses. In addition to insurance, it
engages in health care, retail and real estate both in China and
elsewhere.
Elsewhere, Mr. Liang said Fosun is looking at investments in
European real estate. The company is also focused on taking
advantage of the growing numbers of mainland Chinese travelers
overseas. To that end, Fosun earlier this year bought a 5% stake in
British travel firm Thomas Cook Group.
Fosun has spent more than $6 billion buying overseas assets
since 2010, though its debt level fell in December from a year
earlier.
Back home, Fosun is planning to float the Chinese advertising
company it delisted from Nasdaq Stock Market two years ago.
Focus Media Holdings Ltd., which operates liquid-crystal
displays that show ads in elevators and supermarkets across China,
was taken private by a group of investors, including Fosun and U.S.
private-equity firm Carlyle, for about $3.7 billion.
"I believe Focus Media will accelerate its listing plan on [the]
back of strong performance [in] China's equity market this year,"
Mr. Liang said.
Write to Yvonne Lee at yvonne.lee@wsj.com
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