China’s Fosun Plans to Raise $1 Billion to Fund Insurance Industry Acquisitions

May 11, 2015 by Joyce Koh and Fox Hu

Fosun International Ltd., the Chinese conglomerate that’s been buying insurers and property overseas, plans to raise $1 billion partly to fund acquisitions in the insurance industry.

The company will sell the shares at HK$19.48 to HK$20.32 each, according to a term sheet obtained by Bloomberg. The shares will be sold at a 3 percent to 7 percent discount to the last closing price on May 8.

Fosun Group, backed by Chinese billionaire Guo Guangchang, has been on an acquisition spree ranging from Australian energy companies to New York city office buildings. Fosun International said last week it is planning a $1.84 billion merger with Bermuda-based insurer Ironshore Inc. after buying the shares it doesn’t already own.

The company will need to secure adequate equity and debt or dispose of assets in the next 10 months to settle the acquisition of Ironshore, Moody’s Investors Service analyst Kai Hu wrote in a report Monday.

Fosun’s “sizeable payments” due before the end of the year and reliance on short-term debt funding are putting pressure on its liquidity, Hu wrote. The company’s unpaid investment obligations were about $3 billion and it had 46 billion yuan ($7.4 billion) in short-term debt at the end of 2014, Hu estimated.

Fosun International could increase the offer to as much as $1.2 billion, according to the term sheet.

The company will “definitely” invest in more insurers in Europe and the U.S. in the coming two years, Guo, a self- confessed student of Warren Buffett, said in an interview at Bloomberg’s headquarters in New York last month.

Fosun International, based in Shanghai, earned about 13 percent of total revenue from its insurance business in 2014, according to data compiled by Bloomberg.

It is talking with three to four insurance companies at home and abroad for potential investments, Caixin magazine reported in April, citing Chief Executive Officer Liang Xinjun’s comments on a conference call with investors.

Fosun’s overseas deals have included French resort operator Club Mediterranee SA and Raffaele Caruso SpA, an Italian maker of $3,300 men’s suits. It also bought 60-story One Chase Manhattan Plaza in New York, which it renamed 28 Liberty and uses as its U.S. head office.

China’s insurers, including Fosun and Anbang Insurance Group Co. have been on a global buying spree.

Fosun offered $433 million in December to buy Southfield, Michigan-based property-casualty-focused Meadowbrook Insurance Group Inc., and is also said to be looking at Bermuda-incorporated OneBeacon Insurance Group Ltd.

It also bought an 80 percent stake in the insurance unit of Portugal’s Caixa Geral de Depositos SA last year.

–With assistance from Emma Dong in Shanghai.

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