Posted by: Frederik Balfour on October 3, 2008
Executives at Ping An Insurance must be breathing a collective sigh of relief. A deal for the Chinese company to pay about $3 billion for a 50% stake in Fortis’ asset management arm was scrapped following the $15.4 billion emergency government bailout at Belgian bank Fortis announced on September 28. Ping An must be smarting from the drubbing it has taken since buying a 4.2% stake in Fortis itself, for which it paid $2.7 billion. That stake is now worth a fraction of what Ping An paid.
Ping An isn’t the only Chinese company to have narrowly escaped a bum banking deal. In March, Citic Securities dodged a bullet when a deal to pay about $120 per share for a 6% stake in Bear Stearns fell apart after the collapse of the Wall Street Investment Bank, whose shares had plummeted to $6 before JP Morgan took it over.
But China’s sovereign fund, China Investment Corp, or CIC, has made some pretty horrendous stumbles investing in the U.S. financial sector since it was set up last year. Its investment in Blackstone made about a year ago before the private equity company went public has done nothing but go south since. And the $5 billion CIC paid for a 9.9% stake in Morgan Stanley more than a year ago hasn’t fared much better.
Rather than being once burned, twice shy, perhaps those controlling the purse strings at China’s cash rich institutions should be taking their cue from Japan, and taking advantage of the carnage on Wall St. to scoop up financial assets on the cheap. Nomura has bought up Lehman’s Asian operations, and Mitsubishi took a stake in Morgan Stanley—diluting CIC’s share in the process.
One deal to watch: Bank of China’s September purchase of a 20% stake in France’s venerable Rothschild banking operations. Whether that merchant bank will emerge from the financial crisis unscathed remains an open question.