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Capital Markets, Financial

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Categorized | Financial

Fosun becomes largest shareholder in Portugal’s leading bank

Posted on November 20, 2016

Fosun, led by the tycoon known as “China’s Warren Buffett”, has acquired almost 17 per cent of Millennium BCP, making the conglomerate the biggest shareholder in the largest listed bank in Portugal, where it already owns the largest insurer.

The deal is the latest in a series of significant Portuguese acquisitions by Chinese groups who have pumped billions into the country since the financial crisis, buying stakes in electricity generation, the national grid, insurance, hospitals, water and other sectors.

Fosun paid €175m for 16.7 per cent of BCP and has expressed “a strong interest” in subsequently lifting its shareholding to 30 per cent, the bank said on Sunday. The sale was made through a private placement of new shares at €1.1089 a share, an 11 per cent discount on Friday’s closing price. BCP, whose share price has fallen by more than two-thirds over the past year, has a market value of about €1bn.

In 2014, Fosun, one of China’s most acquisitive groups chaired by one of the country’s richest men Guo Guangchang, paid €1bn for state-owned Caixa Seguros Saúde, Portugal’s largest insurance group, known by the brand name Fidelidade, and used it to buy the distressed Espírito Santo group’s hospital business for €460.5m.

BCP’s stake sale to Fosun comes as Portugal’s struggling financial sector undergoes a broad transformation of ownership aimed at clearing bad loans and increasing capital.

While the rising number of corporate acquisitions by Chinese groups have caused angst in countries such as Germany, Portuguese companies and government have welcomed Chinese capital as a means of shoring up businesses facing insolvency, capital and debt problems after the EU and the International Monetary Fund bailed the country out in 2014.

Another Chinese group, China Minsheng Financial Holding, is among candidates bidding for Novo Banco, the so-called good bank rescued from the ruins of Banco Espírito Santo, which collapsed two years ago.

The acquisition, which makes Fosun BCP’s largest shareholder ahead of Angola’s Sonangol, will help fund a partial recapitalisation of BCP, which has to pay off the balance of a €750m government loan by June following a state bailout in 2013.

Mr Guo has a fortune of $6.6bn, according to the Hurun report. The 49-year-old tycoon has used cash from his group’s insurance businesses to fund its expansion into other sectors. Over the past year, Fosun has bought Ironshore, a US property and casualty insurer, German private bank H&A, Indian pharmaceutical group Gland Pharma and Wolverhampton Wanderers, the UK football club. Other group assets include Club Med and a 25 per cent stake in Cirque du Soleil.

The purchases have cemented Mr Guo’s reputation as one of his country’s most acquisitive tycoons despite a run-in with the authorities in December 2015, when he was briefly detained to aid police in a corruption investigation unrelated to Fosun. Mr Guo was not charged with any wrongdoing in connection with the investigation, which focused on a former Shanghai vice mayor.

Fosun hopes to increase its stake in BCP to about 30 per cent, through capital increases and share purchases once a 20-per-cent cap on shareholder voting rights is lifted. The limit is expected to be raised to 30 per cent at a shareholder meeting on December 19.

Fosun is expected to use BCP’s co-operation agreement with Ageas, Belgium’s largest insurer, to establish what the bank described as “long-term insurance distribution agreements outside Portugal”.

Fosun will acquire two seats on BCP’s nine-strong executive board. It will also be able to appoint three non-executive directors if its shareholding rises above 23 per cent.