More than nine interested parties have expressed their interest in bidding for Nan Shan Life Insurance Co (南山人壽), sources said yesterday.
The wide interest in Nan Shan Life, which is 97.5 percent owned by the financially troubled American International Group Inc (AIG), is likely to drive its price up to nearly NT$80 billion (US$2.43 billion) from the US insurer’s floor price of US$2 billion, a source said.
The deal is expected to close in September.
“Some of the interested parties may have formed joint ventures to submit a joint bid,” he said.
Among the contenders, Chinatrust Financial Holding Co (中信金控) is probably the most suitable candidate since it lacks an insurance subsidiary, an analyst who requested anonymity said.
Nan Shan has hired Morgan Stanley, which has a 4.01 percent stake in Chinatrust Financial, to arrange its sales, the analyst said.
“But I don’t think it will be a good deal if the price [for Nan Shan] closes at around NT$80 billion,” the analyst said.
Although Cathay Financial Holding Co (國泰金控) and Fubon Financial Holding Co (富邦金控) — already the two largest domestic life insurers — have both expressed an interest in Nan Shan, the analyst said the two were likely to back out because of the lack of synergy as well as the risk and cost of managing overlapping policyholders and agents from Nan Shan.
The analyst said potential buyers should “be aware” that purchasing Nan Shan would be the “easy” part, but managing it would be “difficult.”
He added that share dilution and possible layoffs of Nan Shan’s “costly” agents were two hot potatoes that would likely keep Fubon Financial and Cathay Financial out of the deal.
Nan Shan has a sales force of about 35,000 serving 4 million policyholders. It has 24 branches and 427 sales offices nationwide.
Other potential contenders include Ruentex Group (潤泰集團) and private equity (PE) funds such as Carlyle Group, Primus Financial Holdings Ltd, MBK Partners Ltd, KKR & Co and Affinity Equity Partners Ltd, the source said yesterday.
Local media speculated that Ruentex could team up Carlyle or BlackRock Inc to compete head-to-head with Chinatrust Financial.
However, Financial Supervisory Commission Chairman Sean Chen (陳冲) said the financial regulator “does not welcome PE fund buyers if they are aiming for quick gains [out of the deal]” rather than long-term holding.
But he added that not all PE funds were vultures and his commission would take the prospective buyer’s track record into consideration when reviewing their applications.
Although the banker-turned chairman doesn’t object to the idea of PE funds borrowing loans from local banks to buy up Nan Shan, he advised local banks to carefully evaluate the credit risk of extending such loans.