Canada Markets closed

HSBC Weighs Bid for Aviva’s Asian Assets in Diversity Push

Dinesh Nair, Ambereen Choudhury and Jan-Henrik Förster

(Bloomberg) -- HSBC Holdings Plc, the bank that shook up its senior leadership this month, is considering a bid for Asian operations being sold by Aviva Plc as it seeks ways to diversify its business in the region, people with knowledge of the matter said.

London-based HSBC is in the early stages of weighing an offer for at least part of Aviva’s Asian business, the people said, asking not to be identified because the information is private. A deal would help HSBC bolster its insurance presence in Singapore and other parts of Southeast Asia, the people said.

Aviva, the U.K. insurance conglomerate whose shares have dropped 27% in the last 12 months, confirmed in August it’s examining options for its Asian business as new Chief Executive Officer Maurice Tulloch’s turnaround takes shape. The company’s operations in the region could be valued at about $3 billion to $4 billion, with an official process slated to kick off later this year, Bloomberg News reported earlier.

Other suitors are also considering bids for the Aviva assets, the people said. No final decisions have been made, and there’s no certainty the deliberations will result in a transaction, the people said. Representatives for HSBC and Aviva declined to comment.

Shares of HSBC fell 0.6% as of 2:01 p.m. in Hong Kong on Thursday, while they rose 0.2% to 598.30 pence in London on Wednesday. Aviva’s American depositary receipts rose 2.1% in New York over-the-counter trading. The company’s London-listed shares rose 0.1% to close at 358.50 pence.

Earlier in August, HSBC abruptly ousted Chief Executive Officer John Flint after just 18 months. Chairman Mark Tucker was increasingly at odds with Flint over the CEO’s focus on expansion in China, people with knowledge of the matter said at the time. The head of HSBC’s China business resigned the same week, and the bank unveiled a new round of job cuts that could eliminate 4,000 roles.

Hong Kong, where HSBC generates more than half of its pretax profit, has for weeks been roiled in protests that have left the business and financial elite increasingly concerned about the city’s growth prospects. The bank’s presence in the rival Asian hub of Singapore is smaller than some international competitors such as Standard Chartered Plc.

Aviva has been capitalizing on the surging ranks of middle class consumers in Asia, many of whom are newcomers to life insurance policies. Singapore is the company’s largest market in Asia, with its life insurance unit there generating 1.3 billion pounds ($1.6 billion) in new business and 141 million pounds in adjusted operating profit last year, according to its latest annual report.

What Bloomberg Intelligence Says

“Aviva’s Singapore business will be front and center as it mulls its Asian segments, including the option to sell them. The insurer may be inclined to sell its Asia units as a package, as smaller units may have less M&A appeal without the dominant Singapore segment. For suitors, there should be strong consolidation interest in Singapore. Regional peers such as Singapore-based FWD and Japanese insurers might also consider Aviva’s units in China, India, Indonesia and Vietnam.”

-- Steven Lam, insurance analyst

--Click here for the research

(Updates to add Bloomberg Intelliegence report.)

--With assistance from Will Hadfield, Dominic Lau, Manuel Baigorri and Stefania Spezzati.

To contact the reporters on this story: Dinesh Nair in London at dnair5@bloomberg.net;Ambereen Choudhury in London at achoudhury@bloomberg.net;Jan-Henrik Förster in Zurich at jforster20@bloomberg.net

To contact the editors responsible for this story: Aaron Kirchfeld at akirchfeld@bloomberg.net, ;Sree Vidya Bhaktavatsalam at sbhaktavatsa@bloomberg.net, Ben Scent, Amy Thomson

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.