Industrial and Commercial Bank of China Ltd., the world's most profitable bank, is set to buy a 70% stake in Shanghai-based AXA-Minmetals Assurance Co. Ltd. from China Minmetals Corp. and AXA SA, the official Shanghai Securities News reported Wednesday, citing an unnamed source.
ICBC has submitted the acquisition proposal, which will eventually turn AXA-Minmetals into a Chinese-controlled entity, for regulatory approval, the report said.
AXA and China Minmetals will hold a combined 30% stake after the purchase, with AXA seeing its current 51% stake in the joint venture (JV) reduced to not more than 25%, the report said, without giving the size of the deal.
AXA-Minmetals was set up in June 1999 as the first Sino-French insurance JV, in which China Minmetals holds a 49% stake.
Upon the completion of the deal, ICBC will become the fourth domestic bank to have invested in the insurance sector, after Bank of Communications Co. Ltd., Bank of Beijing Co. Ltd. and China Construction Bank Corp..
The China Banking Regulatory Commission (CBRC) issued new guidelines in November allowing the nation's commercial banks to take stakes in insurance companies.
BoCom took over the 51% stake in an insurance JV previously owned by China Life Insurance Co. Ltd. in September, becoming the first domestic bank to enter the insurance market.
In the past few months a number of foreign shareholders, including Britain’s Standard Life Plc. and Canadian-based Manulife Financial Corp. have cut holdings in their insurance JVs in China, but have not made a complete exit from the market.
Analysts believe this trend is being spurred by the future growth potential of local insurance firms.
Cash rich Chinese partners are in a better position to fund the growth of Sino-foreign insurance JVs, and face less restriction if the companies are majority held by domestic enterprises, giving foreign investors the chance to maximize the returns on their investments when they finally decide to cash in.