China's Warren Buffett Buys European Insurer for $1.36B

Jan 11 2014, 11:30am CST | by

China's Warren Buffett Buys European Insurer for $1.36B

Chinese conglomerate Fosun International Ltd. picked up Portuguese insurance firm Caixa Seguros e Saude this
week for 1 billion euros ($1.36 billion), marking one of the biggest overseas investments in the finance sector to date by a Chinese investor.

In a sign of China’s growing economic clout, Fosun bested U.S. buyout firm Apollo Management International LLP to acquire the insurance arm of Portugal state bank Caixa Geral de Depositos SA, according to a statement on Thursday by Fosun International Chairman Guo Guangchang.

The Portuguese government is being forced to sell the insurance firm as a condition of the 78 billion euro ($106 billion) bailout it received from the European Union, while Fosun is among the giant Chinese firms looking to diversify overseas as the country’s economy slows down and investors pick over perceived bargains in the US and Europe.

China’s Most Diversified Global Investor

Fosun, which owns Chinese real estate developer Shanghai Forte Land, has been among the most active overseas investors from China, and is striving to diversify its holdings away from the property sector. Guo, as the company’s leader, has been compared to Berkshire Hathaway‘s Warren Buffett for his ability to discover worthy investments across a variety of industries.

During October last year the Shanghai-based firm, which got its start converting industrial facilities into housing developments, did grab international headlines when it bought 1 Chase Manhattan Plaza from JP Morgan Chase for US$725 million, in the largest acquisition of an overseas real estate asset to date by a Chinese investor. (Although deals such as Greenland Group’s acquisition of the $4 billion Atlantic Yards project may have higher headline numbers, the actual investment in these development projects will not be known until they are complete some years down the road).

However, while other Chinese firms such as Greenland Group have focused on acquiring real estate in the US, UK and other parts of the globe, Fosun has moved into retail, leisure and other sectors. Last year the conglomerate paid 23.38 million euros ($28.14 million) for a 7.1 percent stake in France’s Club Med, and in September invested what is said to have been a few million euros for a 35% stake in high-end Italian menswear brand Caruso.

Pursuing Insurance to Become Buffett

While the company has made investments in a number of industries, just as Berkshire Hathaway has shown a preference for insurance assets, Fosun has been particularly eager to enter this area of financial services. During 2012 it established Pramerica Fosun Life Insurance Co Ltd in China through a 50-50 joint venture with Prudential Financial Inc, and in 2013 acquired an 85 percent share in Hong Kong’s Peak Reinsurance Co Ltd for $468 million.

In a press release on Friday Guo remarked of the Caixa acquisition, “This marks a solid step for Fosun to evolve into Warren Buffett’s model.” Buffett’s Berkshire Hathaway owns US insurance firm GEICO and 10 other firms in the sector.

Guo and Fosun have prospered through this investment strategy as the 46 year-0ld billionaire ranked 31st on the most recent Forbes China Rich List with an estimated net worth of US$3.25 billion.

While the company is being careful to spread its investments around, Guo also said in a December interview that the company would like to buy more real estate assets in US gateway cities such as New York and San Francisco.

Source: Forbes Business

 
 

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