China’s Anbang in Talks to Buy German Real Estate Lender PBB

FRANKFURT—Anbang Insurance Group of China is in talks to buy the large real estate arm of failed German lender Hypo Real Estate AG, in a potential billion-euro deal that would expand the Beijing-based firm’s global shopping spree, according to people familiar with the matter.

State-owned bank Hypo Real Estate, based in Munich, has said it is working to sell its real-estate lending division, Deutsche Pfandbriefbank AG, through either an initial public offering or an outright sale to a buyer. The move was ordered by the European Commission as a condition for the European Union’s executive arm allowing a €10 billion ($11.39 billion) bailout to Hypo Real Estate in mid-2008.

The German government must cede control of the bank this year under terms of the deal. Hypo expects suitors to place binding bids later this month in a deal that could value the unit at about €1.5 billion, people familiar with the matter said.

A sale to Anbang isn’t a foregone conclusion, however, as rival bidders still could outbid the Chinese insurer.

People familiar with the matter said private-equity firm Blackstone Group LP also expressed interest in PBB.

A stumbling block for any buyer could be the need to secure regulatory approval before the EC deadline by the end of this year. The approval process usually takes up several months in Germany.

If PBB isn’t sold to a buyer, the German government could float it on the stock market in the third quarter.

In March, PBB said it expected first-quarter pretax profit to rise to €45 million from €38 million in the same period last year. The uptick comes despite a €79 million write-down on its €200 million exposure to the wind-down unit of failed Austrian lender Hypo Group Alpe Adria, which has rippled through Europe’s financial sector. PBB could be valued at €1.2 billion to €1.8 billion, if it is valued at multiples comparable to those in recent similar deals, taking account of uncertainties including the Heta exposure.

Chinese financial firms have expanded aggressively overseas over the past year. Anbang and China’s Fosun International Ltd. have expressed interest in Portugal’s Novo Banco, carved out of the collapsed Banco Espírito Santo SA, while Chinese insurers have inquired about Italy’s up-for-sale Banca Monte dei Paschi di Siena SpA, people familiar with the deals said earlier.

Last year, total investments by Chinese businesses in European financial groups soared to $3.96 billion from $304 million in 2013, according to data provider Dealogic.

Anbang Insurance Group has tiptoed into Europe with smaller deals so far. Earlier this year, it agreed to buy and recapitalize Vivat, the insurance arm of SNS Reaal, a financial group owned by the Dutch government. In December, Anbang snapped up a small Belgian bank held by Dutch insurance company Delta Lloyd NV. Anbang in February agreed to buy Korean Tong Yang Life Insurance Co. for $1 billion.

Blackstone so far has preferred to buy loan portfolios rather than banks itself. The private-equity firm last year bought a loan portfolio worth €6.39 billion from Spanish lender Catalunya Banc SA and commercial real-estate loans from GE Capital Real Estate in April.

With about €76 billion in assets, PBB last year recorded a pretax profit of more than €174 million, up more than 20% from 2013, on the back of stronger interest income and lower costs.

Read Full Story: China’s Anbang in Talks to Buy German Real Estate Lender PBB