Anbang is Headed for an IPO, But Are We Sure Who Owns It?

Anbang Insurance, the Chinese company that burst on stage in late 2014 with its $1.95 billion acquisition of the Waldorf Astoria, is headed for a Hong Kong stock market listing as early as the middle of next year. While the IPO will put Anbang shares within reach of the public, a recent investigation raises questions about who actually owns the insurer controlled by entrepreneur Wu Xiaohui, and top investment banks including Morgan Stanley are reportedly passing on the chance to handle the potentially multi-billion dollar offering.

Anbang has acquired more than $14 billion in assets outside of China since 2014 but a report in the New York Times last week details how as much as 92 percent of Anbang is currently held by companies owned in part or in full by relatives of Wu or his wife, with a sizable chunk of this global player being held by a group of little-known villagers in a rural county in China’s Zhejiang province.

The names of this group of apparent relatives and acquaintances of Anbang chairman Wu Xiaohui and his wife are attached to a network of companies holding shares in what has rapidly become one of the world’s most aggressive acquirers of real estate and insurance assets.

The murky nature of Anbang’s shareholding has been pointed to as a reason for the company’s abrupt abandonment of a $14 billion bid for Starwood Hotels & Resorts in April this year, with Anbang since coming under the scrutiny of China’s insurance regulators.

Big Connections and Murky Documentation

Little known until a few years ago, Anbang’s rapid rise has widely been tied to Wu’s marriage to a grand-daughter of former top Chinese leader Deng Xiaoping as well as ties to other family members of senior government leaders in Beijing.

Unlike most pre-IPO companies, Anbang’s shares are not legally held by either its chairman or by large investment banks. On paper, the former car insurance start-up appears to be a triumph of people’s capitalism, or at least of creative legal structuring.

The Times investigation found that,

A group of 39 companies control Anbang, which was once a sleepy insurance company and now has $295 billion in assets and a reputation as an ambitious global deal maker. Many of those companies are in turn owned by a welter of shell companies, many with similar names and addresses or common owners.

In attempting to track down the owners of these companies and their places of business, the report led by Michael Forsythe, who previously authored a story linking family members of current president Xi Jinping to commercial developer Dalian Wanda, uncovered more questions than answers.

Although Wu has captured a place in the spotlight with his high profile acquisitions and his speaking engagements with celebrity investors such as Blackstone chief Stephen Schwarzman, the businessman from the Zhejiang city of Wenzhou does not appear as an owner of shares in Anbang.

Many of what appear to be Wu’s relatives from the farm country surrounding Wenzhou do appear among the approximately 100 people owning shares in Anbang, according to the Times. Around one dozen of these people, controlling a stake that holds more than $17 billion in assets, come from Pingyang County or other areas near Wenzhou.

Many of these shareholders own their stakes in Anbang through little known or recently created firms, including one that the Times traced to an empty floor in a Beijing office building and two more whose address consisted of a mail drop above a Beijing post office.

Anbang Ownership Structure Raises Questions

When Anbang was founded in 2004, it listed among its directors some of the high level contacts that are seen as necessary for a Chinese company to win approvals in industries still being released from the government’s guiding hand. Both Levin Zhu, the son of former premier Zhu Rongji, and Chen Xiaolu, the son of a former top Chinese revolutionary leader were among those early directors, but both names have since vanished from the company’s documents, the Times revealed.

At the same time that questions are being raised about Anbang’s ownership and structure, the company is hoping to raise funds from Hong Kong’s public capital markets, where regulations and enforcement on financial transparency far exceed the mainland. Already, US investment bank Morgan Stanley, which was the Asian financial hub’s top IPO arranger over the past decade has declined to submit a proposal for what could potentially be one of 2017’s to public offerings.

“The cautious attitude of the major investment banks reflects the uncertainty whether the Anbang IPO deal can successfully go through,” Zhou Min, a Hong Kong-based analyst at Sanford C. Bernstein & Co., recently said in a report by Bloomberg last week. Zhou cited both Anbang’s opaque structure and its aggressive approach to fundraising as reasons why investors might shy away from the deal.

Standard & Poor’s has also raised questions about Anbang’s structure, with the ratings agency saying in July that it was still unable to fully analyse the company’s financials.