INSURANCE Australia Group Ltd has halted its planned investment in China Pacific Property Insurance Co, saying it was unlikely to proceed due to the domestic parent's listing plan and stake change.
Final execution of the planned A$350 million (US$288.51) to A$375 million transaction was delayed by changes and uncertainty within China Pacific Insurance (Group) Co, the parent of Pacific Property, as the Shanghai-based insurer prepared for an initial public offering, IAG said yesterday on its Website.
IAG said in February 2006 that it had signed a memorandum of understanding with China Pacific Insurance to acquire 24.9 percent of its property insurance arm.
In July 2006 draft transaction agreements were confirmed and lodged with the China Insurance Regulatory Commission.
However, China Pacific's listing plan and Carlyle Group's stake swap from China Pacific's life insurance arm into the parent made the IAG deal hard to make.
The introduction of US private equity shareholders Carlyle at China Pacific also places new constraints on IAG's proposed investment in the property arm, the Australia's largest home and auto insurer said.
IAG Chief Executive Officer Michael Hawker said that he was extremely disappointed that the transaction with CPIC was unlikely to proceed, particularly when IAG had displayed maximum flexibility and good faith in accommodating changes requested by CPIC to the original in-principle July 2006 agreements.
"We remain committed to the Chinese general insurance market and continue to pursue various opportunities with the goal of creating shareholder value through participating in this market as a long term strategic investor," he said.
China Pacific Group is on track to seeking a public listing in Hong Kong after postponing the move at least twice because of market scenarios and internal disagreements.
China Pacific's complicated stake structure has been a major obstacle for its listing.
US private equity company Carlyle Group and Prudential Financial gained approval to convert holdings in China Pacific Insurance's life unit to the parent to clear the way for the group's listing earlier this year.
Last week, China Pacific Property Insurance won approval to increase its registered capital, without mentioning IAG's stake, triggering market speculation that the planned deal may be off.