HONG KONG—Chinese insurer Anbang Insurance Group Co., which just
upped the ante in a bidding war for Starwood Hotels & Resorts
Worldwide Inc., made three unsuccessful offers last year to
purchase the same U.S. luxury hotel chain.
Each time, Anbang and its chairman, Wu Xiaohui, were pressed by
Starwood and its bankers for details on how they would pay for the
deal, according to public filings by Starwood. On the third attempt
on Nov. 3, Anbang withdrew its offer in the middle of a meeting
with Starwood executives, the filings say, after Starwood told the
Chinese insurer it wouldn't be able to proceed without financing
details.
Anbang has exploded onto the international scene in recent years
by spending billions to acquire insurers and hotels throughout the
world. In February 2015, it laid out nearly $2 billion to buy New
York's Waldorf Astoria, the highest price ever paid for a single
U.S. hotel. It is also a big player at home, with stakes in listed
Chinese developers and banks, while also investing in a traditional
Chinese medicine maker and a wind-turbine manufacturer.
On Monday, Starwood said Anbang had made a new, $14 billion
all-cash offer for Starwood, continuing a bidding war with Marriott
International Inc. that started earlier this month. Starwood said
the revised, nonbinding offer from the Anbang-led consortium, which
includes private-equity firms J.C. Flowers & Co. and Primavera
Capital Ltd., was "reasonably likely" to top Marriott's.
Marriott said Monday it remains committed to its latest offer of
cash and shares, worth $13.6 billion when announced last week,
which it believes offers "greater long-term value" to Starwood
shareholders. Starwood and Marriott shareholders are slated to vote
on their deal on April 8.
Complicated ownership
For all its ambition, Anbang remains opaque to many both inside
and outside of China. Its ownership, as of its most recent public
filings, is a mash of corporate shareholders, with multiple layers
of holding companies registered all around the country.
Asked for comment, Anbang said it is owned by 31 corporate
investors that don't participate in the daily operation of the
company. It added that its strategic and investment committee
selected the investors in 2014 out of over 300 interested
parties.
The Beijing-based company has gotten financial backing from
state lender China Construction Bank Corp. for its Starwood bid,
people familiar with the matter said earlier, and it owns big
stakes in other Chinese banks. Yet insurance-industry analysts in
China have warned that Anbang's aggressive acquisitions could be
straining its books. Standard & Poor's in November said it
suspended its ratings on Vivat, the Dutch insurer Anbang bought
last year, because it was "unable to secure sufficient information
to accurately assess" Anbang's creditworthiness.
Anbang said in a statement that S&P would rate Vivat after
it rates its parent company, Anbang's life insurance arm. Vivat has
received positive ratings from other agencies, Anbang said.
Several Wall Street banks haven't gotten internal clearance to
pursue work with Anbang in the past, partly because it is unclear
who effectively owns the company, people familiar with the matter
said. None of those people said the banks had ruled out working
with Anbang in the future.
Anbang didn't dispute accounts of individual banks that have
declined to do business with it. In a written statement, it said:
"Anbang has engaged in and has fully complied with all corporate
governance and internal compliance procedures, including 'Know Your
Customer' regulations, with top-tier financial advisers, such as
Bank of America Merrill Lynch, Credit Suisse, Deutsche Bank,
Evercore Partners, Goldman Sachs, Nomura and PJT Partners." It
added that regulatory authorities in Asia, Europe, and the U.S. had
approved Anbang acquisitions in the past.
Anbang acquisitions have been cleared by a number of government
oversight bodies, including Dutch and South Korean insurance
regulators and the Committee on Foreign Investment in the U.S., or
CFIUS. CFIUS review includes an examination of the ultimate
beneficial ownership of foreign companies, lawyers said.
"We've worked with Anbang senior leadership for many years now
and have always found them to be astute businesspeople," said Chris
Flowers, chief executive of J.C. Flowers, in a statement. "We have
seen them successfully execute deals in multiple jurisdictions and
we have had several successful interactions with them."
Anbang was founded to sell car insurance in 2004 in the city of
Ningbo, just south of Shanghai, with a cast of powerful backers.
Early investors include Shanghai Automotive Industry Corp., now
SAIC Corp., China's biggest car company, and state-owned energy
giant China Petroleum & Chemical Corp., also known as Sinopec.
Chen Xiaolu, the youngest son of revolutionary Communist general
Chen Yi, is a director, online Chinese corporate registry records
show.
By 2010 Anbang had won coveted licenses from China's insurance
regulator to sell property, life and health insurance as well.
Today, Anbang says it has $254 billion (1.65 trillion yuan) in
assets and that its goal is to become one of the "top 10
comprehensive financial groups in the world." In 2014, Anbang had
nearly $4.2 billion in net profit and a net return on equity of
37%, according to a video of a presentation Mr. Wu made last year
at the Global Insurance Forum in New York, which was held at
Anbang's newly purchased Waldorf Astoria.
"The shareholders want to build Anbang into a global financial
empire, rather than a pure insurance firm," said Eva Liu, an
analyst at Z-Ben Advisors, a Shanghai-based consulting firm.
Anbang has been spending billions to build that empire at home
and abroad. Mr. Wu has set his sights on battered European
financial firms such as Vivat and Belgium's Delta Lloyd Bank that
are inexpensive and could prove a source of funding for further
investments. He is also snatching up high-quality hotel properties
with strong cash flow.
In a transcript of remarks Anbang says were given at a Harvard
University recruitment event last year, Mr. Wu gives a folksy
description of the company's investment strategy, saying Anbang is
targeting high-returning assets in five areas, corresponding to
five fingers, from the Internet and real estate to life
sciences.
In overseas acquisitions, it is important for Anbang to "win the
first battle and every battle thereafter as we are representing
Chinese enterprises going global," he said.
China's slowing growth could be hastening Anbang's push abroad.
In a January 2015 interview in Caixin, a Chinese business magazine,
Anbang director Chen Xiaolu says he advised Mr. Wu to invest in
U.S. dollar assets because China's domestic economic growth was
slowing while the U.S. was recovering.
Anbang's investors include a collection of 39 Chinese companies
in sectors from cars to real estate, according to online corporate
registry filings viewed by The Wall Street Journal. Local media
have said some of those firms may have ties to the family of former
Chinese leader Deng Xiaoping, whose granddaughter married Mr.
Wu.
Mr. Wu and members of the Deng family couldn't be reached for
comment. Anbang didn't make executives at the company available for
interviews.
A due-diligence report on Anbang compiled for a global
investment bank and viewed by The Wall Street Journal noted
Anbang's reported connections with the Deng family as well as
recruitment of former senior Chinese officials.
The report noted questions about Anbang's funding, particularly
the source of nearly 50 billion yuan worth of capital put into
Anbang in 2014 by 31 new shareholders with names including Ningbo
World Automobile City Co. Ltd. and Dream Future Investment Co.
Ltd.
A person answering the phone at Ningbo World Automobile City
said she didn't know about the company's relationship with Anbang
and declined to make anyone else available to answer questions. The
mobile phone for Dream Future listed in the Beijing corporate
registry was powered off.
Anbang's approach to international investments represents a
change in tone among Chinese acquirers, who in the past timidly
stepped into foreign markets. So far this year, Chinese buyers have
launched bids for over $100 billion in overseas deals. In the
latest acquisition wave, Chinese buyers have shown themselves
willing to make aggressive bids for foreign targets, sometimes
breaking up already-agreed deals or seeking control of sensitive
targets. Many of the Chinese buyers are helmed by charismatic
leaders with strong political connections and backing from state
lenders.
'Ordinary' person
Little verified information exists in the public domain about
Mr. Wu, who is 49 years old. He describes himself as an "ordinary"
person whom employees can "email directly" in remarks on Anbang's
website, which the company said Mr. Wu gave at the 2015 Harvard
event. Anbang said he has a public administration degree from the
National University of Singapore.
In 2014, Anbang's growth went into overdrive. It more than
quintupled its registered capital, or shareholder equity, from 12
billion to 61.9 billion yuan, online corporate registry records
show, making it the largest Chinese insurer by that measure, though
not by policies or sales.
Before 2014, shareholding in Anbang was concentrated among a
small group of investment firms as well as Sinopec and SAIC. With
the capital raise, Anbang brought on 31 new shareholders, including
little-known investment, real-estate and automotive companies
spread around China. As of the end of 2014, the last date for which
online corporate registry records are available, no single entity
had contributed more than 4% of Anbang's registered capital.
Some of the companies that invested in Anbang in 2014 appear to
be related. According to online corporate registry records, some
share current or former shareholders and legal representatives, or
people appointed to act on behalf of the companies.
(MORE TO FOLLOW) Dow Jones Newswires
March 28, 2016 18:55 ET (22:55 GMT)
Nine of Anbang's new investors were registered in Sichuan
province roughly within a month of each other, in December 2012 and
January 2013. Several of the Beijing companies which invested in
Anbang in 2014 at one point listed the same contact email address,
the online corporate registry records show. Emails to that address
went unanswered, and mobile phones for the three companies listed
in the Beijing corporate registry were turned off.
Sichuan province-registered Shuangliu Guoyi Investment Co. Ltd.,
which contributed roughly 3.6% of Anbang's registered capital in
September 2014, is in turn owned by a Jiangsu Province-registered
car dealership, according to Chinese corporate registries. The
dealership's majority shareholder is a Beijing-registered
technology company owned by two individuals for whom contact
information wasn't listed and who couldn't otherwise be
reached.
Prior to December 2014, the Jiangsu car dealership was owned by
a Shenzhen-registered car dealership, which itself contributed 3.7%
of Anbang's registered capital. Before May 2014, Shuangliu Guoyi
was owned by a Zhejiang investment company.
A person answering the number listed in the corporate registry
for Shuangliu Guoyi hung up when asked a question about Anbang. The
Shenzhen car dealership and Zhejiang investment company couldn't be
reached for comment, and a person answering the number listed for
the Beijing technology company said it was the wrong number. The
company couldn't otherwise be reached. A person answering the phone
at the Jiangsu car dealership said she didn't know about the
company's relationship with Anbang and declined to make anyone else
available to answer questions.
Anbang's growth has required Chinese government approval every
step of the way, from getting licenses from China's insurance
regulator to navigating the thicket of agencies which approve
outbound foreign investment.
"The fact that the company has been allowed to flourish both
domestically and outside of China indicates pretty consistent and
strong support from the Chinese government at a very high level,"
said Victor Shih, a political-science professor at the University
of California-San Diego.
In 2014, Anbang also accelerated its overseas buying spree. It
agreed to purchase the Waldorf Astoria from Hilton Worldwide
Holdings Inc. in October of that year. Mr. Wu pledged to renovate
and furnish the landmark property with a Chinese restaurant
designed to "showcase the true depth of the country's cuisine,"
according to the hotel's website, in time for last year's United
Nations General Assembly. Chinese President Xi Jinping stayed there
during the U.N. meetings, while President Obama decamped to the New
York Palace Hotel.
Mr. Wu now hobnobs with one of the world's richest
private-equity investors, Stephen Schwarzman of Blackstone Group
LP, which agreed to sell luxury hotel group Strategic Hotels &
Resorts Inc. to Anbang earlier this month for around $6.5 billion
including debt.
At the Harvard recruitment event, Mr. Wu said he hadn't let his
achievements go to his head. "When you've been through as many
things and as many business negotiations, you will most likely be
polished into a smooth character," Mr. Wu said, according to the
transcript on Anbang's website. "But I do not seem that wise or
worldly. I'm even a bit simple, as a child."
Write to Rick Carew at rick.carew@wsj.com and Ned Levin at
ned.levin@wsj.com
(END) Dow Jones Newswires
March 28, 2016 18:55 ET (22:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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