AXA $1bn Taikang sale on ice amid new regulation fears

December 12, 2009
Singapore Democrats

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AltAssets

The auction for AXA’s stake in Chinese insurance company Taikang Life has been put on hold as a result of fears about new rules drafted by industry regulators.

According to Reuters, there are growing concerns that new regulation on the Chinese insurance industry could make it difficult for private equity firms to invest in the sector. Blackstone and KKR are reportedly among the bidders for AXA’s 15.6 per cent stake in the company, along with Singapore state investor Temasek. The stake is expected to fetch around $1bn.

Draft rules being circulated reportedly dictate that an investor should use its own capital to invest instead of using leverage from banks, and that an investor should have a strong capital base with a certain level of net assets.

In their current form, the rules appear to explicitly prohibit foreign private equity firms from investing in the Chinese insurance sector, as firms often use loans to finance acquisitions, and may not necessarily have any similar companies in their portfolios.

AXA’s decision to auction the stake was reportedly motivated by regulatory requirements prohibiting overseas groups from holding stakes in more than one insurance company.

It is currently unclear how and when the new rules will be applied, or if they will pass in their current form. The auction is said to be on hold until next year.Based in Beijing, Taikang has 120 branches and distributes through 150,000 independent agents.

http://www.altassets.com/private-equity-news/article/nz17529.html