China's Anbang plans IPO after strong year of hotel acquisitions

Last week, CBRE released a new report—"Chinese Capital Dominates Asian Outbound Investment in H1 2016”—in which the company found that Chinese groups accounted for around 60 percent of total Asian outbound investment, up from 34.7 percent just a year ago. The growth has been led by insurance firms facing “a scarcity of profitable domestic assets” during the first half of 2016. 

According to CBRE, China’s outbound property investment rose by 144 percent to $16.1 billion during the first six months of the year, compared with $6.6 billion during the same period a year ago. “Demand for overseas assets rose as a growing number of companies are keen to reduce their exposure to local market risk. The lack of investable domestic assets is another important reason,” Alan Li, head of investment and capital markets for Greater China at CBRE, told the South China Morning Post.

Anbang and Insurance

Chinese insurance companies accounted for half of the country's total overseas investment at an estimated $8 billion. And ever since it acquired New York City’s Waldorf Astoria in 2014, Anbang Insurance Group has been in the limelight, and with good reason. The company spent more than $7.3 billion on overseas acquisitions in the first half of 2016 alone, including the acquisition of Strategic Hotels & Resorts, with a portfolio of 16 hotels, from Blackstone Group for $6.5 billion. For several weeks in March, the industry held its breath while it waited to see if Anbang would succeed in its $14-billion bid to woo Starwood Hotels & Resorts away from Marriott International. The deal fell through, but not before it forced Marriott to increase its own bid for the company.

At the time, Chinese financial magazine Caixin reported that China's insurance regulator was likely to reject Anbang's bid for Starwood because completing the deals would break rules banning insurers from investing more than 15 percent of their assets abroad. 

But even after that setback, Anbang is still making moves. The company, known for being private and secretive about its plans, is reportedly planning to go public. Anbang is looking to list its life insurance business (as well as many of its overseas businesses) in Hong Kong, and has invited investment banks to pitch for advisory mandates in the coming weeks, according to Reuters. Anbang has not set a firm timetable of the planned initial public offering, but one source said banks had been asked to submit requests for the proposal by Aug. 26, and the IPO could take place by mid-2017.

As the Financial Times noted, Anbang’s business model has relied on raising cash for acquisitions through investment-related insurance products. In June, the company became China’s most prominent issuer of such policies, taking in $28.4 billion in payments in the first five months of the year, up from $1.7 billion in the same period a year ago.

As such, taking Anbang public could help bring in more funds to pave the way for more acquisitions, and could see more brands come under its umbrella. We’ll have to see what happens next year if and when the IPO takes place.