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China conglomerate Fosun to merge insurer in US$1.84b deal
[HONG KONG] Fosun International Ltd, the investment arm of China's biggest closely held conglomerate, is planning a US$1.84 billion merger with Ironshore Inc after buying the shares it doesn't already own in the Bermuda-based insurer.
Fosun's unit Mettlesome Investment 2 will combine with Ironshore to boost its presence in the insurance business, the Shanghai-based company said in a statement to the Hong Kong stock exchange on Sunday. The company completed the acquisition of a 20 per cent stake in Ironshore, it said in February.
Fosun Group is backed by Chinese billionaire Guo Guangchang, who calls himself a student of Warren Buffett, and has been on an acquisition spree ranging from Australian energy companies to New York city office buildings. The US market is "vibrant" and Fosun has "many deals" under discussion even after asset prices went up "a lot," MR Guo said in an interview at Bloomberg's headquarters in New York last month.
"The group has been endeavoring determined efforts in establishing insurance as its core business and developing insurance as one of the key growth engines," Fosun International said in its stock exchange filing. "This acquisition will bring synergies for both parties in prevention of currency risks, expansion of assets allocation and cooperation in reinsurance business."
Fosun International earned about 13 per cent of total revenue from its insurance business in 2014, according to data compiled by Bloomberg. Steel contributes the most revenue at about 45 per cent. The company also has a presence in property development and pharmaceuticals.
The merger consideration will increase at the rate of 8 per cent per annum from Dec 31, 2014 until the deal's completion, to a maximum of US$2.1 billion, Fosun said. Ironshore, which provides broker-sourced specialty commercial property and casualty coverage, had net assets of US$1.84 billion as of last year.
The deal is subjected to regulatory approval and may be terminated prior to March 31, 2016, according to the statement. Ironshore will continue as the surviving company and become an indirect, wholly-owned subsidiary of Fosun after the merger.
Fosun has spent almost US$25 billion on overseas acquisitions since 2010, according to data compiled by Bloomberg. Deals include French resort operator Club Med and Raffaele Caruso SpA, an Italian maker of US$3,300 men's suits. It also bought 60-story One Chase Manhattan Plaza in New York, which it renamed 28 Liberty and uses as its US head office.