China Huarong secures $2.4b from investors ahead of IPO
A group of private investors will pay RMB14.5 billion ($2.35 billion) for a combined 20.98% stake in China Huarong Asset Management, one of four groups tasked with managing non-performing loans (NPLs) from state-owned banks, ahead of a planned public listing.
The consortium includes China Life Insurance, Warburg Pincus, Goldman Sachs, CITIC Securities International, Malaysia's Khazanah Nasional, China International Capital Corp. (CICC), COFCO Group and Fosun International.
PE investors reportedly started to submit offers for a minority stake in Huarong in January of this year.
"In accordance with restructuring plans approved by the State Council, China Huarong will seek a market window to make a public offering of its shares following the introduction of strategic investors," the company said in a statement.
Last December, China Cinda Asset Management, another of the four asset management corporations (AMCs), raised $2.9 billion through a Hong Kong IPO. The company previously received strategic investment from the likes of CITIC Capital, UBS and Standard Chartered alongside the National Council for Social Security Fund (NSSF). Boyu Capital is also understood to have invested.
"This is an important milestone for China Huarong, marking a positive step by a state-owned financial asset management company to explore the mixed-ownership structure for state-owned enterprises (SOEs)," said Xiaomin Lai, Huarong's chairman.
He added that the strategic partnership will not only help Huarong enhance its capital strength and improve its corporate governance, but also introduce international standards to improve the firm's operations and service.
Huarong is the largest of the AMCs with assets of RMB408.7 billion. It was established in 1999 and is majority-owned by the Ministry of Finance, with China Life Insurance holding a small minority stake. The company reported a net profit of RMB10.1 billion in 2013, up 44% year-on-year, as its purchases of distressed assets rose dramatically.
Citigroup advised Huarong and J.P. Morgan advised Warburg Pincus on the transaction.
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