People with a passing interest in Chinese finance are likely familiar with both HSBC (Hong Kong Shanghai Banking Corporation) and Ping An Insurance – two of the three companies involved in a deal that is currently waiting approval from China’s insurance regulators.
HSBC plans to sell their 15 percent stake (which is worth almost $10 billion) in Ping An to four wholly-owned subsidiaries of the not so high profile Charoen Pokphand Group.
The Charoen Pokphang Group, also sometimes referred to as the CP Group, is a Thai conglomerate and many media reports over recent weeks have questioned whether they are acting on their own or on behalf of some mysterious third party. This is something that the CP Group has denied.
The deal now appears to be in trouble as the Hong Kong branch of China Development Bank, a long time creditor of the CP Group, has said that they are no longer willing to back the HK$44 billion loan needed to finance the second stage of the acquisition. According to media reports, China Development Bank stated that it contravened regulations that prohibit it from issuing loans that would be used to purchase shares in an insurance company.
While we await the China Insurance Regulatory Commission’s (CIRC) final decision, we thought it might be a good idea to invite our resident Thai journalist to provide readers with a bit of background on the Charoen Pokphand Group.
The CP Group, has a very prestigious reputation in Thailand. In Thailand, CP is not just a company, it’s a legend.
The company has grown from humble origins. A Chinese family that migrated from the south of China to Thailand last century opened a seed shop in a small alley in Bangkok’s Chinatown in 1921. From this small store the company grew into one of the leading Thai conglomerates, which according to its official website, employs over 280,000 people and invests in 15 countries worldwide generating over $33 Billion annually.
Dhanin Chearavanont, chairmain of the CP Group, is also one of the wealthiest men in Thailand.
The company is not a new comer to Mainland China. It was one of the first foreign companies to invest in China when the country started in on its reform and opening up in the late seventies. In 1985 the CP Group started operating poultry farms on the mainland, today they have farms in 29 of China’s 31 provinces. The group then began to expand to other food processing sectors and more recently has also jumped into new areas like retail, real estate and the auto industry.
Consumers in China might know CP through various products. Among others, there are Lotus Super Centers (卜蜂莲花) dotted around the country and they produce Dayang Motorcycles (大阳摩托) in Henan Province.
Earlier this year, it joined partnership with China’s SAIC Motor to build MG cars in Thailand.
CP’s plan to acquire shares in Ping An Insurance raised eyebrows among financial reporters in Bangkok because the company is best known for its focus on agribusiness and famous for its vertical business expansion model. In fact, Thai business schools often take the CP Group as the text book model to explain vertical integration to their students.
In recent years, the CP group has started to diversify and is trying new business ventures such as entering into the Thai telecommunications sector and attempting to get a footold in real estate development and petrochemicals. Despite these efforts to branch out, the CP Group has up until now had little to do with the insurance industry.