Ping An to Buy 20% Stake in Chinese Developer for $2 Billion

(Bloomberg) -- A unit of Ping An Insurance (Group) Co., China's largest insurer by market value, plans to purchase a 19.7 percent stake in local developer China Fortune Land Development Co.

The insurer's asset management unit will spend 13.8 billion yuan ($2.1 billion), or 23.66 yuan a share, to buy 582 million shares of the builder from the company's controlling shareholder, China Fortune Land said in a filing to the Shanghai Stock Exchange on Tuesday. The transaction will boost the stake owned by Ping An's asset management arm and co-investors to 19.9 percent, according to the filing.

The purchase of the stake comes after a renewed drive by Chinese regulators to contain risks in the property market, dragging down an index of Chinese property companies by 16 percent in the past month. Share prices of China Fortune Land have almost halved from a record high in February after authorities imposed strict restrictions on sales of property around Beijing, where most of the firm's projects are located.

“Real estate is still one of the few sectors in China that offers high returns with manageable risks, which is ideal for insurance investments,” said Toni Ho, an analyst at RHB Osk Securities in Hong Kong. “Ping An may have planned it for a while, and after a stock market slide, it found the right timing.”

Ping An and peers are growing their portfolios with listed real estate firms. Ping An is second-largest shareholder of leading builders Country Garden Holdings Co. and Cifi Holdings Group Co., with a 9 percent stake and a 9.7 percent stake respectively. Anbang Life Insurance and Funde Sino Life Insurance Co. have amassed stakes in builders including Gemdale Corp. and Kaisa Group Holdings.

Despite Ping An's track record of being a passive investor with Country Garden and Cifi, the deal will boost investors' confidence on China Fortune Land, said Ho. China Fortune Land rose 9.7 percent to 27.31 yuan in Shanghai on Tuesday, almost hitting the 10 percent daily trading limit.

The purchase would make Ping An the second-largest owner after controlling holder China Fortune Land Development Holding, which will hold a 42.7 percent stake. The developer was the country's ninth-largest by sales last year, famous for its unique city-building business model to develop industry hubs and collect revenue from local governments. The deal will improve Fortune Land's corporate governance and profitability, according to the filing.

To contact Bloomberg News staff for this story: Emma Dong in Shanghai at edong10@bloomberg.net

To contact the editors responsible for this story: Sree Vidya Bhaktavatsalam at sbhaktavatsa@bloomberg.net, Jeanette Rodrigues, Sam Mamudi

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