ING Vends Off Thailand Unit - Analyst Blog

By Zacks | November 21, 2012 AAA

Netherlands-based ING Groep NV (ING) announced to sell its lucrative Thailand Asset management business to Singapore's United Overseas Bank Ltd. The divestment is likely to fetch about $12.8 million (¬10 million) in cash. The company is offloading its Asian operations to repay the state debt.

It is estimated that the Thai division managed nearly $3.7 billion worth of assets as of September end this year. However, there is no official word on the closure of the deal from either of the parties. Credit Suisse Group (CS) and Nomura Holdings, Inc. (NMR) acted as the chief advisors to ING Groep and United Bank, respectively.

After having failed to find a single buyer for its Asian operations, ING Groep is now selling its operations regionally. The disposal of the Thai division leaves the company with its asset management operations in South Korea, Hong Kong, Malaysia, Taiwan, Japan, India and Singapore. ING Groep's Thai investment management unit is the third largest of its Asian fund management units. South Korea is the largest and Taiwan is the second largest of the units.

As per ING Groep's regulatory filings, its Asia investment management business has a book value of ¬200 million and controls about ¬43.3 billion worth of assets.

Background

ING Groep is aiming to divest all its Asian assets, especially the insurance and investment-management businesses by the end of 2013. This is mainly for the repayment of $13 billion (¬10 billion) state financial aid, which the company received from the Dutch government during the financial crisis in 2008. The company also plans to vend its banking assets to accelerate repayment of the remaining amount of roughly $3.9 billion (¬ 3 billion) with premiums.

The selling of Thai operations is the latest deal that the company entered with an aim to sell off its Asian assets. Earlier in October, it had announced a deal to vend its lucrative Malaysian insurance business to Asian insurance giant AIA Group Ltd. for approximately $1.7 billion (¬1.3 billion).

Apart from this, ING announced the divestiture of its insurance business, pension and financial planning divisions in Hong Kong and Macau, as well as its life insurance operations in Thailand to Pacific Century Group for a total of $2.14 billion (¬1.64 billion) in cash.

In the same month, it also announced a deal to sell its entire stake in China Merchants Fund (CMF) to the joint venture partners of the fund - China Merchants Bank and China Merchants Securities Co. Ltd. The deal will bring $128 million (¬98 million) in cash to ING and is expected to be completed in the second quarter of 2013, subject to certain regulatory terms and conditions.

Other Global Divestments

Besides selling its Asian businesses, ING Groep has offloaded a couple of its other global businesses in the last few quarters to streamline the operations and focus mainly on core banking activities. Last month, it agreed to sell ING Direct UK - its British online banking division - to UK banking giant Barclays PLC (BCS).

Earlier, in August, ING Groep announced the sale of ING Direct Canada - the Internet banking division of ING Bank of Canada - to The Bank of Nova Scotia (BNS). Further, in February 2012, it completed the sale of its online banking unit, ING Direct USA, to Capital One Financial Corp. (COF).

We believe these deals will help ING Groep repay its bailout dues soon. Further, it will enable the company to focus more on its core businesses amidst a bleak macroeconomic environment.

ING Groep currently retains a Zacks #4 Rank, which translates into a short-term Sell rating.

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