A multi-billion dollar deal concerning HSBC’s sale of its stake in Ping An faces a high possibility of falling through. The collapse of the deal is expected to aversely impact the Britain branch of HSBC, as it would impede its efforts to sell its non-core assets as part of a broad restructuring plan to improve profitability.
The $9.4 billion deal was initially supposed to be funded by state-owned China Development Bank (CDB). It entails the acquisition of HSBC’s 15.57% stake in Ping An, the second life insurer in China, at $59 a share by Thai conglomerate Charoen Pokphand (CP) Group.
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However, executives at the China Development Bank have recently raised oppositions to the deal, as the loan to the Thai firm might have breached state regulations.
"Indeed, there are some problems," said one of the sources, referring to CDB’s role in the sale. The sources were not authorised to speak publicly on the issue.
The China Insurance Regulatory Commission (IRC) is poised to reject the deal over funding concerns, according to recent reports by The South China Morning Post. The reports also note that the Chinese regulators concerns stem from the source of the money and if the CP Group would be the real buyer of the stake.
Ping An’s stock price has since felt the repercussions of the new developments. It fell 0.59%to HK$67.75 (USD8.74) on Tuesday, after having fallen 4 percent the day before.
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