In April 2017, Anbang Insurance Group, one of China’s most aggressive cross-border acquirers, lost its bid to purchase U.S. insurer Fidelity & Guaranty Life (FGL) after failing to secure approval from the states of Iowa and New York. FGL had agreed a takeover deal with Anbang worth US$1.6bn as early as November 2015 and received clearance from the Committee on Foreign Investment in the United States (CFIUS), but was subsequently rejected by New York regulators on the grounds that the Chinese insurer was being too secretive about its capital origins.
The high-profile takeover is the latest in a string of deals that have fallen through for Anbang. The hitherto little-known insurer has been on an aggressive buying spree since late 2014, but hasn’t had much luck recently. In March 2016, the company withdrew a US$14bn offer to acquire US hotel-chain operator Starwood Hotels & Resorts Worldwide Inc., owner of the Sheraton and Westin brands. In March 2017, Anbang abandoned talks for a US$7.5bn investment in a property under Kushner Companies, the firm operated by US President Donald Trump’s son-in-law Jared Kushner, after lawmakers cited potential conflicts of interest.
Anbang’s unique business trajectory and background have piqued the interest of regulators in China and beyond. Experts have commented that Anbang’s position as one of the most politically connected firms in China raised concerns among US regulators over conflicts of interest. Anbang Chairman Wu Xiaohui is reportedly married to the granddaughter of China’s former paramount leader Deng Xiaoping. He is also a close associate of Levin Zhu, the son of former Chinese premier Zhu Rongji. The younger Zhu was CEO of China International Capital Corporation, a listed investment bank in China.
Political Connections
Anbang’s buying spree could potentially be thwarted by regulations recently instituted in China. In May 2016, Chinese insurance regulators ordered inspections of several companies, including Anbang, as it sought more clarity on the financing of its acquisitions. The inspection, ordered from the highest echelons of the central government, came amid an anti-corruption campaign launched by President Xi Jinping when he took power in 2013. New controls to curb capital outflows could also limit Anbang’s overseas activities. Outbound real estate investment by Chinese firms fell 84.3% year-on-year in January 2017, and Anbang hasn’t had a successful acquisition since a US$6.5bn hotel deal in March 2016.
The setbacks are unlikely to curb Anbang’s ambitions permanently, however. The company has spent more than US$30bn acquiring properties and insurance companies — including Strategic Hotels & Resorts for US$6.5bn in March 2016 and the iconic Waldorf Astoria Hotel for US$1.95bn in October 2014 — and as recently as March 2017 Anbang chairman Wu hinted at the possibility of acquiring European businesses. It seems certain that, as the domestic Chinese economy slows and investment opportunities dwindle, Chinese companies are going to continue finding ways to snap up businesses overseas.
China’s aggressive cross-border acquisitions
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Written by Datarama Analyst Siew Hwee.
