Fortis scraps asset management deal with Ping An
AMSTERDAM (Reuters) - Partially nationalised Fortis FOR.ASFOR.BR scrapped its 2.15 billion euro ($3 billion) deal to sell half of its asset management arm to China's Ping An Insurance Co (601318.SS) (2318.HK) on Tuesday.
The deal could not be completed because of "severe market disruption and the ongoing uncertainty in the global capital markets," the Belgian-Dutch financial group said in a statement.
The announcement came two days after the governments of Belgium, the Netherlands and Luxembourg swooped in to rescue Fortis with a 11.2 billion euros capital injection.
Fortis Investment Management, which has 240 billion euros under management and had already been merged with ABN AMRO asset management earlier this year, will remain 100 percent-owned by the financial group, Fortis said in a statement.
"I am not surprised," said a fund manager at one of Fortis's top 10 investors. "It was always a possibility."
Several analysts and fund managers had expressed fears the tie-up would not be consummated as the banking group struggled to survive this week.
Fortis had already prepared for the worst with its Ping An deal.
In a conference call on Monday, Fortis's newly anointed Chief Executive Filip Dierckx said that proceeds from the Ping An deal had not been factored into the 9 percent core tier capital ratio that Fortis will have as a result of the rescue deal.
"It's not included," he told reporters, adding that on completion, the ratio would be much higher than 9 percent.
Ping An has also taken a 5 percent stake in Fortis in the past year, which almost certainly would have to be written down because of the 77 percent drop in Fortis's share price since last November, when Ping An first invested in the company.
Shares of Ping An ended nearly 11 percent lower in Hong Kong on Monday on fears of losses from the Fortis investment. Trading in its Shanghai-listed shares was closed along with the market for the Chinese National Day holidays.
The deal for Ping An to buy half of Fortis Investments had not yet won Chinese government approval and Ping An had not yet paid for its joint venture stake.
Fortis's asset management operation, after merging with ABN AMRO Investment Management in April, had an equal split between retail and institutional clients. Of the combined 2,600 staff, 500 were made redundant.
The problems at Fortis, whose shares dropped by 50 percent in September, were partly blamed on its taking a slice of ABN AMRO in last year's 70 billion euro purchase of ABN with partners Royal Bank of Scotland (RBS.L) and Santander (SAN.MC).
Within two months of securing ABN, Fortis sold a 4.2 percent stake in itself to Ping An for $2.7 billion. Ping An later upped that stake to 5 percent by buying shares on the market and had indicated that it was willing to go as high as 7 percent.
Those stakes were in addition to the deal to buy half of Fortis Investments. Fortis was hoping that the deal with Ping An would give it a secure foothold in Asia, where it also planned to used acquired ABN assets to beef up its wealth management business.
Fortis also issued 13 billion euros worth of stock to raise money to buy its share of ABN, but as the credit crisis deepened, it was forced to announce an 8 billion euros solvency plan in June, which led to the sacking of the CEO who orchestrated the ABN purchase, Jean-Paul Votron.
Fortis will sell the parts of Dutch bank ABN AMRO it bought last year, but ING (ING.AS) said on Monday it was not interested in the assets "after careful consideration."
In the biggest European bank bailout since the credit crisis began, the Belgian, Dutch and Luxembourg governments took a 49 percent stake in Fortis for 11.2 billion euros.
Fortis shares managed to recover on Tuesday for the first time in over a week, climbing 8.4 percent to close at 4.30 euros. They are still down nearly 80 percent from a year earlier.
The rescue of Fortis, the biggest private employer in Belgium, followed emergency talks with European Central Bank President Jean-Claude Trichet on Sunday. The bank employs 85,000 staff globally.
(Editing by Richard Chang, Gary Hill)
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