Ping An said to weigh bid for Prudential's Asian business

[HONG KONG] Ping An Insurance (Group) Co, the largest Chinese insurer by market value, has evaluated acquiring Prudential Plc's Asia business, people familiar with the matter said.

Ping An has sounded out the Chinese government about whether it would be supportive of a deal, according to one of the people. The Shenzhen-based insurer has also discussed potential financing options with banks, another person said, asking not to be identified discussing sensitive information.

Deliberations are at an early stage, the people said, and it wasn't immediately clear how a deal to gain control of Prudential's Asian business would be structured. The UK company hasn't been approached, one person said. Shares of Prudential rose as much as 4.4 per cent, before paring gains to 3.2 per cent as of 3.49 pm in London.

Prudential's business in Asia, including its Eastspring asset management unit, could be valued at £40 billion (S$70.5 billion), according to a sum-of-the-parts estimate from Panmure Gordon & Co analyst Barrie Cornes. Potential buyers may well have to pay a premium to that to gain control, Cornes said. It would mark Ping An's biggest-ever acquisition by far, and would likely be one of the largest Chinese overseas deals in a year marked by growing resistance to investment from China.

Ping An had about US$81 billion of cash and equivalents as of March 31 after generating US$26 billion of free cash flow in the first quarter, data compiled by Bloomberg show.

Shares in Ping An have retreated 13 per cent this year in Hong Kong, trimming its market value to US$160 billion. Prudential was valued at £46 billion as of Tuesday's close.

Prudential is bullish on Asia and wouldn't consider a sale of its business in the region, Chief Executive Officer Mike Wells said in a Bloomberg Television interview on Wednesday. "This is a highly under-penetrated, fast-growing market" for insurance that also offers asset management opportunities.

First-half operating profit from Prudential's Asian business jumped 14 per cent to £1.02 billion on a constant exchange rate basis, the insurer said Wednesday. Asia contributed about 42 per cent of Prudential's total operating profit during the period, up from 35 percent for all of last year, data compiled by Bloomberg show.

Spokesmen for Ping An and Prudential declined to comment.

Mr Wells is planning to spin off Prudential's UK operations, to focus on faster-growing markets such as Asia. The 170-year-old firm will also hold on to businesses in Africa and the US, while splitting M&G Prudential - formed last year through the combination of its UK asset-management business with European insurance assets - into a new company.

Ping An has been under pressure to find new areas of growth after China's crackdown on financial risk limited prospects for the nation's insurance firms. It's been busy buying up stakes in listed companies including property developer China Fortune Land Development Co, and was part of a group that successfully delisted Qihoo 360 Technology Co from US markets in 2016 and relisted the company at several times its previous value in Shanghai.

BLOOMBERG