ING has reached an agreement to the selling of its Latin American pensions, life insurance and investment management operations to Grupo de Inversiones Suramericana (Gruposura). The transaction should amount to EUR 2.68 billion, and marks the financial disengagement of ING’s insurance and investment management activities.
Under the terms of the agreement, ING will receive approximately EUR 2,615 million in cash and GRUPOSURA will assume EUR 65 million in debt. In addition, earnings until closing will remain with ING. The transaction values the Latin American insurance and investment management operations business at 16x estimated 2011 earnings and 1.8x book value at closing estimated at EUR 1.490 billion, both on an IFRS basis. On a pro-forma local GAAP basis the transaction is valued at 18x estimated earnings.
“Over the years we have built a first rate Latin American franchise with a terrific management team and leading market positions in most countries we operate in. I am pleased that we have found in GRUPOSURA a very solid and complementary owner with the ambition to further build on the success of this leading Latin American pensions and insurance provider, in the interests of both our customers and our employees,” said Jan Hommen, CEO of ING Group. “Going forward, we continue to prepare our remaining Insurance and Investment Management businesses for our base case of two IPOs – one for the U.S. businesses and one for the European and Asian businesses – so that we will be ready to proceed when markets are favourable.”
The deal, subject to regulatory approval, is expected to close by the end of the year, and could deliver a net transaction result of EUR 1 billion to ING. The transaction, including cash proceeds, debt reduction in Latin America, and the extraction of excess capital prior to closing, is expected to reduce the leverage in ING Insurance by approximately EUR 2.8 billion.
Included in the transaction are the mandatory pension and voluntary savings businesses in Chile, Colombia, Mexico, Uruguay and ING’s 80% stake in AFP Integra S.A. in Peru; the life insurance businesses in Chile and Peru; including ING’s 33.7% stake in InVita Seguros de Vida S.A. in Peru. The transaction also includes the local investment management capabilities in these five countries. These businesses combined serve over 10 million clients through approximately 7,000 employees, have assets under management of EUR 49 billion and leadership positions in all of the countries and markets in which they operate. In 2010, these businesses earned EUR 192 million in net income, on approximately EUR 670 million in revenues on an IFRS basis, helped by their leading position in retirement services and the outperformance of the investment management capabilities.
The new combination will be a leading Latin American savings and investments group with approximately USD 120 billion in assets under management. The combined businesses will serve over 25 million customers across 8 countries in North, Central, and South America.
Not included in the transaction is ING’s 36% in leading Brazilian insurer Sul America SA which ING will also seek to divest separately.
ING’s Commercial Banking activities in Mexico, Brazil and Argentina are not affected by today’s announcement. ING’s Mortgage and ING’s Leasing businesses in Mexico are not part of today’s transaction.
GRUPOSURA is a financial holding company listed on the Colombian stock exchange, and is registered in the ADR- Level 1 program in the United States and on Latibex, the Euro Market for Latin American Stocks. The company has investments in leading Colombian companies, including Colombia’s biggest insurance company and number one bank, and also holds significant stakes in companies in other countries throughout the Americas.
In line with IFRS requirements, and starting with the publication of ING’s second-quarter results on 4 August 2011, ING will report the results of the Latin American insurance and investment management operations included in this transaction as results from discontinued operations and categorize these businesses on the balance sheet as “Non Current Assets Held for Sale.” These reporting changes will be implemented in the disclosure for second quarter results, on 4 August 2011, and relevant historical data will be restated accordingly.
Source : Reuters
