Chapter 664 Hot Potato
Back in 2005.
Xinhua Insurance Group once hired PricewaterhouseCoopers to conduct the audit. Later, because many doubts arose in the company's financial operations and involved problems of irregular misappropriation, the insurance company was worried that the news would be exposed and chose to terminate the contract with PricewaterhouseCoopers.
After learning about the relevant situation, Fan Wumian contacted PricewaterhouseCoopers through McKinsey Consulting Company to ask for some previous audit reports. Combined with some intelligence collected from various companies and departments, he had a better understanding of the situation of Xinhua Insurance Group.
Just as the president of Bank of China said, there are indeed some problems with Xinhua Insurance Group, but the negative impact is still within the controllable range.
Although a hole of about RMB 27 billion has been left, and there is not enough working capital to fill it for the time being, the valuation of Xinhua Insurance Group has also been reduced accordingly, and the purchase price appears to be very cost-effective.
Moreover, the insurance company can continue to pay interest on the RMB 27 billion debt through negotiation and postpone repayment. As long as the group's revenue is greater than the debt interest expenses during this period, Fan Wumian feels that the situation is not that difficult.
From this we can see that the president of Bank of China is indeed quite capable and really recommended him a good project with considerable potential.
It only took one day to carefully understand the situation, and Fan Wumian quickly came to the conclusion that "it was worth buying at the bottom."
Although he currently had other uses for the cash, Xinhua Insurance Group would not wait for him. The opportunity to become the actual controller of this large insurance company was gone, so Fan Wumian immediately made a decision and personally asked the president of Bank of China to help with the matchmaking. He wanted to arrange a meal with people from relevant units to discuss investing in the acquisition of part of the shares.
Faced with such a great investment opportunity, he certainly didn't want to miss it.
But while we are excited, we can't help but feel a little helpless, mainly because many high-quality assets in the mainland are now worth only a bargain price, and too many high-quality chips have been picked up by foreign capital at low prices.
Take Xinhua Insurance Group for example. About 24% of the company's shares are held by companies such as Zurich Insurance, Meiji Life Insurance and Netherlands Financial Development.
Even though he knew that the authorities were busy playing chess, using the mainland market as bait in exchange for the opportunity to deeply integrate into the global market, Fan Wumian still couldn't help feeling a little unhappy when he looked at the eye-catching names on the list of shareholders.
This prompted Fan Wumian to come up with another idea. He planned to use the Bandit King Fund and Boshi Fund Company to take advantage of the fact that New China Life Group was in deep trouble and to buy back about 24% of New China Life’s shares from these foreign companies in the form of private equity investment.
Instead of trying to revitalize Xinhua Insurance Group and letting these foreign investors take advantage of it, Fan Wumian felt that it would be better to let the big private equity clients of his fund company benefit from it.
At the very least, he helped these big private equity clients make money, and he could also charge management fees and 20% performance commission.
After Fan Wumian made the decision, his employees immediately took action and began to contact these foreign companies before formal negotiations with the China Insurance Regulatory Commission.
In just over a dozen hours, the International Finance Corporation, Zurich Insurance, Meiji Life Insurance and Netherlands Financial Development agreed to cash out at valuations ranging from RMB 70 billion to RMB 75 billion.
It's not because of good luck, but because the New China Life Insurance Group was embroiled in scandals, coupled with the negative impact of the subprime mortgage crisis, which made it impossible for these foreign investors to refuse the opportunity to withdraw in time when faced with acquisition invitations.
These foreign companies all raised funds around 2000, and by cashing out at valuations of more than RMB 70 billion, they were able to make considerable profits.
Xinhua Insurance Group only earned about 3.4 million yuan last year, and its financial report for the first quarter of this year was also a bit ugly. The profits would be better off being used to buy U.S. bonds and earn interest. These foreign companies certainly don't want to continue to waste money on it.
The process of buying back shares from foreign companies was so smooth that it was beyond Fan Wumian's expectations. He had thought that he might have to pay some money, but he didn't expect everyone to be so easy to talk to.
As for the CIRC, upon learning that Fan Wumian was willing to acquire the company and would be responsible for the subsequent debt repayment work, they were so happy that it was like New Year’s Day.
They could not wait to help him contact a number of companies including Loncin Group Co., Ltd., Nanhai Island Green Island Investment Co., Ltd. and Oriental Group Industrial Co., Ltd., to discuss selling a large number of shares to him at a price of RMB 5.99 per share, accounting for 38.815% of the total share capital of Xinhua Insurance.
Just as the discussion started, several other major shareholders also wanted to cash out. The original intention was to buy at the bottom, but these shareholders were too enthusiastic. In order to cash out, they even went to Fan Wumian's house to give him gifts and took the initiative to give him a 5.99% discount on the basis of 95 yuan per share, just to ask him to accept the New China Life shares in his hands.
This action made him feel uneasy, as if Xinhua Insurance Group was going to go bankrupt tomorrow. He was afraid that he would step into a big trap by accident. But after studying it carefully, he felt that everything was normal.
All we can say is that not everyone is like Fan Wumian, who thinks that the prospects for the development of the mainland economy are bright.
Many people have begun to feel that the mainland's economic development is about to reach a bottleneck period. More pessimistic economists and businessmen may even believe the foreign theory of "China's collapse."
The current situation is that countless people still use the island country as a target for the mainland's economic development to catch up, and believe that it will take 10 to 20 years for the mainland's total economic output to catch up with the island country's GDP.
From this perspective, the unusual phenomenon of giving gifts at someone's doorstep, offering discounts, and then cashing out and leaving doesn't seem so bizarre.
Major shareholders of listed companies often dream of cashing out. A company like New China Life Insurance, which has no hope of going public in the short term and is mired in scandals, is like a hot potato in the eyes of many people, and they can't wait to pass it on to others.
For several consecutive days, Fan Wumian was mainly busy dealing with the acquisition of Xinhua Insurance Group.
Initially, he only wanted to become the actual controller, but he accidentally acquired more shares than expected. Together with the 24% of New China Life shares indirectly held through the asset management company, it was found after later statistics that the total shareholding was 70.325% of the total share capital of New China Life Group.
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"It's good to be happy that I have a company worth hundreds of billions of RMB, but I can't help but feel a little weird. I still don't understand why they are so pessimistic about the development prospects of insurance companies. It's like when I ask the price at a street stall, the stall owner is instantly ecstatic and immediately gives me the product, which makes me doubt that the price I gave was too high."
At this moment, Fan Wumian was sitting in his study, having a video call with Zuo Ziyan who was far away at Cambridge University.
The rosewood armchair under me has a beautiful shape and is well made, but it never feels comfortable to sit on. The wood always hurts my back and looks a bit flashy.
Zuo Ziyan replied:
"Isn't this normal? It would be strange if you were so optimistic about the development prospects of this insurance company."
"It still has a deficit of 27 billion yuan on its books, but it only made 3.4 million yuan last year. If it maintains this level of net profit, it will take eight years to fill the hole."
"Moreover, for a company with an annual profit of 3.4 million RMB, the price-to-earnings ratio is estimated at 20 times to reach the 70 billion RMB valuation you offered. You have been eyeing the nearly billion RMB assets of Xinhua Insurance Group, while others are eyeing the working capital in your hands. How much money did you borrow from the bank this time?"
Fan Wumian obviously has his own plans. The success rate and rate of return of his overseas investments cannot be calculated according to common sense. Taking over Xinhua Insurance Group will obviously be a great advantage.
Without explaining anything to Zuo Ziyan, he said lazily:
"I paid out a total of 10 billion yuan, and borrowed about 22.5 billion yuan from the Bank of China. I may need to borrow another 5 million yuan to finance it, and use this money to fill the hole and repay the debt."
"Overall, I feel it's OK. Xinhua Insurance Group and the CIRC have jointly issued an announcement. If this insurance company becomes famous, the premiums received by the company will also increase significantly. Except that I don't know how to reallocate assets for a while, other aspects are pretty good."
"Asset management companies need to consider what their clients think, and they are inevitably restricted when investing overseas. The money on the books of insurance companies is suitable for investing in some long-term projects, even if there are some fluctuations. It doesn't matter much."
"I am considering investing in gold-related companies to indirectly increase my gold holdings. Gold is relatively resistant to risks. Since I am not optimistic about the future financial market, the price of gold may rise sharply. In addition, the real estate in the mainland also has certain risk resistance properties. The next round of economic development may depend on the real estate market to drive it."
(End of this chapter)