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Thai Group Buys $9.4 Billion Ping An Stake From HSBC

A group linked to Thailand's richest man, Dhanin Chearavanont, has bought global bank HSBC's entire stake in China's Ping An Insurance for $9.38 billion, with China Development Bank backing Asia's second-largest deal this year.

HSBC said on Wednesday it had sold the 15.6 percent stake to an affiliate of Charoen Pokphand Group, a group controlled by Chearavanont which is better known for its agri-business empire than writing insurance policies.

"This is phenomenal for HSBC shareholders because the bank is now sitting on at least $8 billion in profit," said Jim Antos, an analyst at Mizuho Securities in Hong Kong.

"I'm not sure what CP Group would do with the stake though. I was joking earlier that every Ping An shareholder will now get a bucket of fried chicken for their insurance policy."

CP Group, whose products include feed for chickens and pigs, has a long history in China.

Chearavanont - worth $9 billion according to Forbes magazine - also appears to have strong political connections in Beijing. State-run China Development Bank is helping to finance CP Group's Ping An stake acquisition, according to HSBC.

CP Group was the first multinational to invest in China's agri-business in 1979 and, under Beijing's latest five-year plan, it was tasked with helping to modernise China's farm sector. It also operates Lotus super markets in Shanghai, according to the company's website.

CP Group once held an interest in a Thai joint venture with German insurer Allianz which it sold for 300 million baht ($9.78 million) in May this year.

For its part, HSBC is on a global plan to divest various holdings as it seeks to improve its profitability, exiting the decade-old investment as it looks to sell non-core assets.

(Read more: HSBC Might Pay $1.8 Billion Money Laundering Fine)

Thailand's outbound acquisition prowess has grown significantly this year, fuelled by a hot stock market and cashed-up Thai tycoons seeking to invest abroad. Announced Thai M&A deals have soared to a record $18.7 billion so far this year, overtaking the total value of deals in 2010 and 2011 combined, according to Thomson Reuters data.

The Thailand SET Index is up 29.7 percent year to date.

HSBC sold its stake for HK$59 per Ping An share, for a total of HK$72.74 billion ($9.39 billion). Ping An's Hong Kong shares were up 4 percent after the news at HK$60.

The bank said in a statement that the sale would complete in stages, with about a fifth of the stake to be transferred to the Thai buyer on Dec. 7. The remainder is still subject to approval by the China Insurance Regulatory Commission.

Sensitive Sale for HSBC

The Ping An stake, given its size, was an important and sensitive sale for HSBC - one that was rumored to be up for grabs ever since the 2008 financial crisis.

(Read more: China's Ping An Eyes Legal Action After NYT Report)

The deal was personally overseen by a three-man team headed by HSBC CEO Stuart Gulliver. Stephen Moss, group head of M&A for HSBC, and John Flint, former HSBC head of strategy, were the principal deal-makers, according to a source with direct knowledge of the matter.

Analysts expect HSBC's stake in Bank of Communications (BoCom), China's fifth-largest lender, to be next on the list. That stake stands at 19.9 percent and is worth about HK$79 billion, according to Thomson Reuters data.

The bank had spent $1.7 billion to build the 15.6 percent stake in China's second-largest insurer between 2002 and 2005. It confirmed it was in talks to sell the stake on Nov. 19, after the Hong Kong Economic Journal reported the impending sale.

Chearavanont is hoping to realize a similar profit on the holding that HSBC earned, though whether China's stock market sees a similar run over the next decade remains to be seen.

UBS advised the CP Group, the source said. UBS declined to comment.

HSBC had two non-executive board seats as part of its stake in Ping An.

Ping An trades at 2.2 times book value, 33 percent below its five-year median price to book value ratio, according to data from Thomson Reuters StarMine.

The sale was expected as part of HSBC's three-year recovery plan after the 2008 financial crisis and regulatory reforms.

Founded in 1988 as China's first joint-stock insurer, Ping An has grown into one of the world's largest, with 74 million clients, more than 175,000 employees, and about 500,000 agents.

The Ping An deal is Asia's second-biggest acquisition so far this year, behind Chinese oil company CNOOC's planned $15.1 billion purchase of Canada's Nexen.

As part of its Ping An investment, CP Group has agreed to hold any shares it buys for at least six months, HSBC said.

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