Gate-crashing, cutting in: Anbang's recipe for billions of deals

[HONG KONG] As Anbang Insurance Group Co Chairman Wu Xiaohui hunts for purchases on his global dealmaking spree, he often relies on the same tactics: swoop in at the last minute or preempt any other bidders. 

The Chinese owner of New York's Waldorf Astoria hotel this month made a last-minute, US$12.9 billion offer for Starwood Hotels & Resorts Worldwide Inc. Anbang's attempt to derail an agreement by Marriott International Inc. to purchase the owner of Sheraton, Westin and W hotels, just two weeks before a shareholder vote, follows at least three other cases where Wu sought to upend a deal process.

The Beijing-based insurer's agreement earlier in March to buy a US$6.5 billion luxury-hotel portfolio from Blackstone Group LP came three months after the buyout firm took ownership, people with knowledge of the matter said earlier. In 2013, Anbang kept pushing for a deal to acquire a Hong Kong bank even after another party had won exclusivity, according to one person, who asked not to be identified because the information is private.

The deals show how Anbang's Wu seeks to play by his own rules as he builds an insurance, finance and property empire with assets spanning Belgium, the Netherlands, South Korea and the US His first trophy purchase, a 2014 deal for the Waldorf Astoria, came from a preemptive US$1.95 billion bid before an auction could get under way. 

"It's definitely not the so-called corporate style, with investment banking teams and rounds of due diligence," Linda Sun-Mattison, an analyst at Sanford C. Bernstein & Co, said by phone. "The chairman knows what kind of assets he wants, what kind of characteristics he likes, and he does it."

The Chinese company's dealmaking style could form part of the deliberations for the Starwood board, which will balance the competing proposals. Marriott's bid mostly consists of stock, while the Anbang consortium has offered US$76 a share in cash. Starwood can hold discussions with the Anbang-led consortium through March 17.

A purchase of Starwood would bring the amount of acquisitions by Anbang over the past two years to about US$27 billion, data compiled by Bloomberg show. Wu typically avoids turning to outside bankers, instead opting to negotiate most deals himself, according to people who have dealt with him.

"Something like this, coming in at the last minute, is very rare," said Steven Lam, an Asia insurance analyst at Bloomberg Intelligence in Hong Kong. "You don't see that strategy in any typical M&A." One of Anbang's earliest major deal attempts outside mainland China was its pursuit of family-run Hong Kong lender Wing Hang Bank Ltd. beginning in 2013. The Chinese insurer continued contacting the seller and arguing the merits of its proposal even after Singapore's Oversea-Chinese Banking Corp. was granted exclusive rights to negotiate a deal, according to a person with knowledge of the matter.

Wing Hang Bank wasn't convinced of Anbang's ability to finance a deal and opted for the greater certainty of selling to the Singaporean lender, the person said. OCBC agreed in April 2014 to buy the bank for about US$5 billion. A representative for OCBC declined to comment.

Anbang said in an e-mailed statement Tuesday that all its acquisitions are friendly, and it backs out whenever there is opposition from stakeholders. All of Anbang's internal decisions are made by investment professionals, and deals are made only after weighing the costs and benefits, according to the statement.

"Our investments are in fact the final results of numerous project analysis and judgments made by our international investment team," Anbang said in the statement. "We must have conviction that we can make a profit even under the worst case scenario in order to move forward on each investment." 

Anbang, which has about 1.9 trillion yuan (US$291 billion) of assets, has had more success in its recent overseas deals. To purchase the Waldorf Astoria, the insurer preemptively approached Blackstone before the US buyout firm started an auction to sell the landmark property.  Up until Anbang bought the hotel, Wu spoke personally to Tyler Henritze, a top Blackstone dealmaker, with a Blackstone employee serving as translator. Peter Grauer, chairman of Bloomberg LP, the parent of Bloomberg News, is a non-executive director at Blackstone.

In a similar move, the Chinese insurer agreed to buy Strategic Hotels & Resorts Inc. for US$6.5 billion this month. Blackstone had been seeking buyers for individual Strategic Hotels properties when Anbang offered to purchase the entire company, according to people with knowledge of the matter.

Anbang has shown it's willing to pay up for prime assets. The Anbang-led bid for Starwood has an implied valuation that is 13.5 times 2016 earnings before interest, taxes, depreciation and amortization, according to Baird Equity Research. The average valuation of 18 US hotel and lodging chains with a market value of more than US$1 billion was 9 times estimated 2016 Ebitda, data compiled by Bloomberg show.

The insurer's purchase price for the Strategic Hotels portfolio was $450 million more than the roughly US$6 billion including debt that Blackstone paid just three months earlier, according to people familiar with the matter.

"Anbang is run more like a private equity company," said Bernstein's Sun-Mattison. "This doesn't seem a typical insurance asset, but this isn't a typical insurance company. It just happens to be called Anbang Insurance."

BLOOMBERG