Netherlands-based ING Groep NV (ING) is set to vend its lucrative Malaysian insurance business to Asian insurance giant AIA Group Ltd. The deal, which is yet to receive a regulatory approval, is estimated to be worth approximately $1.7 billion (€1.3 billion).
ING Groep's Malaysian business comprises of its life insurance business, employee benefits business and 60% stake in the joint venture ING Public Takaful Ehsan Berhad. The company anticipates a net gain of about €780 million from this deal, which is expected to close in the first quarter of 2013. The Goldman Sachs Group, Inc. (GS) and JPMorgan Chase & Co. (JPM) acted as the chief advisors to ING Groep.
ING Groep is also looking to offload its other Asian assets, which includes its Japanese, South Korean, Hong Kong and Thai insurance units. The company is holding talks with several prospective buyers relating to the divestment. Therefore, the company will have its commercial and retail banking business in the Asia Pacific region remaining as it fits with its new banking-oriented strategy.
Background
ING Groep is aiming at divesting its Asian assets, especially its insurance and investment-management businesses, before the end of 2013. This is mainly for the repayment of $13 billion (€10 billion) state financial aid, which the company received from the Dutch government during the financial crisis of 2008. The company also plans to vend its banking assets to accelerate repayment of the remaining amount of roughly $3.9 billion (€ 3 billion) with premiums.
The selling of Malaysian insurance operations is one of the major deals in the company’s motive to sell off its Asian assets. Earlier this week, the company had announced a deal to sell its entire stake in China Merchants Fund (CMF) to the joint venture partners of the fund namely China Merchants Bank and China Merchants Securities Co. Ltd. The deal will bring $128 million (€98 million) in cash to ING and is expected to be completed in the second quarter of 2013, subject to certain regulatory terms and conditions.
Other Global Divestments
Besides selling its Asian businesses, ING has offloaded a couple of its other global businesses in the last few quarters to streamline the operations and focus mainly on core banking activities. Last week, it agreed to sell ING Direct UK – its British online banking division – to UK banking giant Barclays PLC (BCS). The financial terms of the deal were unrevealed.
Earlier, in August, ING Groep announced the sale of ING Direct Canada – the Internet banking division of ING Bank of Canada – to The Bank of Nova Scotia (BNS). Further, in February 2012, it completed the sale of its online banking unit, ING Direct USA, to Capital One Financial Corp. (COF).
We believe completion of such deals will help ING Groep to repay the bailout funds to the government. Further, it will help the company to pay more attention to its core businesses amidst a bleak macroeconomic environment.
ING Groep currently retains a Zacks #4 Rank, which translates into a short-term Sell rating.
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