Chinese Phrase Adds Mystery to Anbang’s About-Face on Starwood
HONG KONG — An obscure phrase on foreign investment tucked into China’s insurance regulations is being viewed as stunningly cryptic by Western standards. But the collection of words — not even a full sentence — adds to the mystery surrounding the sudden decision by the Chinese insurer Anbang Insurance Group to walk away from a $14 billion bid for the Starwood hotel chain.
The phrase allows insurance companies to make overseas investments, provided the total does not exceed 15 percent of their assets. But the rule does not specify how to calculate the value of the foreign investments.
For example, it does not indicate whether to use historical prices or market prices, nor which exchange rate to use. The rule does not even specify how to determine an insurer’s assets, except to say that they shall be calculated at the end of the previous year.
So regulators have a lot of wiggle room. If the China Insurance Regulatory Commission made an unfavorable calculation, it might have raised the uncertainty for Anbang, compelling the company and its partner to withdraw the bid.
The derailed deal reflects the changing fortunes in China.
In the last couple of years, the Chinese authorities encouraged insurers and other companies to make large overseas acquisitions as a way to diversify and expand beyond their borders. Real estate was particularly attractive, and a rush of Chinese companies as well as wealthy families snapped up properties overseas. The results of a survey a year ago indicated that buyers from China were buying one in every 14 homes sold for more than $1 million in the United States.
But such overseas investments are coming under increased scrutiny as the Chinese economy slows.
Overseas acquisitions account for a significant source of capital outflows. And those outflows, which have weighed on the currency and the markets.
China has been trying hard to slow a rapid flow of money to foreign markets since last summer. And Hong Kong financiers suggested this year that the government had been pressuring insurers to temper their purchases.
Anbang has been one of the most acquisitive Chinese insurers.
Less than three weeks ago, Anbang agreed to pay $6.5 billion to Blackstone to acquire Strategic Hotels and Resorts, which has more than a dozen luxury United States hotels. (The Blackstone transaction is expected to close this year.) Anbang already owns the Waldorf Astoria hotel in New York, which it acquired for $1.95 billion in 2014.
不到三个星期以前，安邦刚刚与黑石集团(Blackstone)达成协议，将支付65亿美元收购该集团旗下的战略酒店及度假村(Strategic Hotels and Resorts)，后者的资产包括十多座美国豪华酒店。（与黑石集团的交易有望在年内完成。）此前，安邦已在2014年以19.5亿美元收购了位于纽约的华尔道夫酒店(Waldorf Astoria)。
If the insurance rules played a role in the abandonment of the Starwood deal, it is also telling that it was Anbang that dropped the deal.
“It would be good for everybody in China to see that the rules are being applied more uniformly than people would have anticipated,” said David Zweig, the director of the Center on China’s Transnational Relations at the Hong Kong University of Science and Technology.
Financing, too, may have been an issue.
Starwood was not comfortable with Anbang’s ability to finance the latest bid of $14 billion, according to people briefed on the matter. An earlier bid by Marriott, just $700 million lower, appeared to meet Starwood’s expectations.
Anbang declined to comment. Its partners — the American private equity firm J. C. Flowers & Company and another private equity firm based in Beijing and Hong Kong, Primavera Capital — did not respond to requests for comment, nor did the insurance commission.
安邦拒绝置评。其合作伙伴——美国私募企业J. C. Flowers & Company及设在北京和香港的私募企业春华资本(Primavera Capital)——也没有回复记者的置评请求。中国保监会亦是如此。
The 15 percent rule appears in Chinese insurance regulations as early as 2012. But it really became relevant only a year and a half ago, when the Chinese government started encouraging insurance companies to invest overseas. Even now, the Chinese insurance industry remains overwhelmingly domestic; only 1.5 percent of its assets were invested overseas as of last summer.
Anbang is one of the few insurers that have made a big overseas push, so the company has been viewed as a test case of how the 15 percent rule would be enforced. But Anbang is a particularly complicated corporate group to analyze for calculating asset ratios.
For example, Anbang bought a 35 percent stake in the Chengdu Rural Commercial Bank in 2011 for nearly $1 billion. But Anbang is closely held. And the limited publicly available data on the insurer does not make clear whether it has included a portion of the bank’s assets in figures for its total domestic assets.