2024-05-28

Fosun Sells German Private Bank HAL and Retains HAFS Asset Servicing Business, Aligns with its Asset-Light Strategy

By Sudarat

HONG KONG, May 28, 2024 – (ACN Newswire via SeaPRwire.com) – Fosun International (HKEX: 0656) issued an announcement on 28 May 2024, announcing the sale of 99.743% of its subsidiary’s shares in the German private bank, Hauck Aufhäuser Lampe Privatbank AG (HAL), to ABN AMRO Bank A.V. for a total consideration of approximately EUR670.3 million. Upon the completion of this transaction, Fosun International will no longer hold shares in HAL, but will fully retain the shares of Hauck & Aufhäuser Fund Services S.A. (HAFS) held by HAL, i.e. retain HAL’s asset servicing business. HAFS is one of the ten major asset servicing companies in German-speaking regions. It has consistently ranked among the top 3 independent third-party fund establishment and asset servicing providers in the Luxembourg market, which is a hub for the fund industry in Europe, giving it strong market influence and recognition. Retaining the shares of HAFS aligns with Fosun’s asset-light operating model. Currently, the transaction parties have signed the agreement, and the transaction will be officially closed upon receiving regulatory approval. The announcement indicates that the sale is part of Fosun’s ongoing efforts to optimize its asset portfolio and focus on asset-light operations.

It is worth noting that based on the transaction consideration of EUR670.3 million, the project is expected to yield double-digit IRR for Fosun. Fosun International acquired HAL (formerly known as H&A) in 2016, and it is not commonly seen for a European financial firm to yield such a rate of return over an 8-year time span. Moreover, this transaction only involves a portion of HAL. Fosun International will continue to hold the asset servicing business, which is an asset-light “cash cow” operation. The retained business is expected to consistently generate tens of millions of euros in annual profits and maintain approximately EUR150 billion in assets under administration. Overall, this transaction demonstrates the Group’s determination to continuously improve its financial performance and maximize shareholder value.

Focusing on core industries, executing prudent investment and divestment strategy to unlock value

Amid the complex global macroeconomic environment and the adverse backdrop of the U.S. Federal Reserve’s consecutive interest rate hikes last year, it is crucial to maintain financial strength and asset liquidity. What’s more commendable is that, in such marco environment, Fosun has been able to continuously improve the efficiency of capital utilization through a flexible exit mechanism.

Guo Guangchang, Chairman of Fosun International said, “Fosun will continue to develop the industries where it boasts clear competitive advantages, enhancing certainty and making stable profit growth as the core objective of Fosun’s future operations.”

This objective is also reflected in Fosun’s emphasis in recent years on maintaining strategic focus and strictly pursuing disciplined asset investment and divestment. On one hand, it has been orderly divesting from certain non-core, non-strategy assets. On the other hand, it has continued to focus on core industries, optimizing its asset portfolio and deeply cultivating high-quality assets to unlock value.

The annual results data shows that Fosun’s strategic focus on “core businesses in the household consumption sector” has yielded remarkable results. Fosun has been focusing on industries where it has established competitive advantages and continuously enhancing its business presence, creating happier lives centered around Health, Happiness, and Wealth for families worldwide. In 2023, Fosun’s four core subsidiaries, namely Yuyuan, Fosun Pharma, Fosun Insurance Portugal and Fosun Tourism Group (FTG) realized a total revenue of RMB142.69 billion, accounting for 72% of the total revenue. The solid development of these four core business segments has formed a robust business support system.

Fosun’s orderly investment and divestment decisions have contributed to the Group’s healthier financial condition. For future development, Fosun will continue to maintain its strategic focus, actively invest and expand in industries where it boasts clear competitive advantages, and make forward-looking plans, deeply exploring the capabilities and value of its ecosystem.

Leveraging asset-light strategy to enhance operational capabilities

After more than 30 years of development, Fosun has accumulated profound operational capabilities. Through asset securitization and exit of bulk assets, as well as promoting industry funds to help industry achieve “multiplier growth”, asset-light operations achieved remarkable results.

Taking FTG as an example, in 2023, FTG leveraged its operational strengths and achieved full recovery in global business performance. Its business volume reached RMB17.15 billion for the year, representing a year-on-year increase of 24.5%; profit attributable to equity holders amounted to RMB310 million. The revenue structure was optimized in 2023, and over 93% of the revenue came from its tourism operations. With the steadily improving asset-light operational capabilities, FTG’s continuous launch of new product lines, such as Club Med Urban Oasis, is expected to help the company seize opportunities in the new track of urban vacations in the Chinese market.

Fosun’s sale of HAL’s banking business, while retaining HAL’s asset servicing business, is another manifestation of the company’s focus on the asset-light operating model. Since the official acquisition of HAL (formerly known as H&A) in 2016, through in-depth operational management and by supporting HAL’s continuous mergers and acquisitions, Fosun has assisted HAL to develop into a leading private bank in Germany. Fosun has also reaped considerable dividend income from HAL. This transaction on the one hand releases the value of HAL, and on the other hand, the retention of the asset servicing business HAFS preserves the tremendous potential for long-term stable profits through asset-light operation, economies of scale, and ecosystem synergies, which can also form good business synergies and complementarity with Fosun’s insurance, asset management, and other financial businesses in Europe. In the future, Fosun will continue to invest in and maintain a close watch on the market opportunities for this business segment.

At this year’s results presentation, Guo Guangchang pointed out that Fosun will focus more on enhancing asset-light operational capabilities. With the asset-light strategy and cooperation with key partners, Fosun will seize the opportunities presented by asset-light operations.

The market expects Fosun’s more flexible and efficient asset-light operating capabilities will allow Fosun to continuously expand its growth horizons, laying a solid foundation for the company to withstand longer business cycles and realize growth in multiple fronts.

Strategically focusing on the two core growth drivers of “Globalization” and “Innovation”

In 2023, Fosun continued to strengthen its global operations and had established a profound business presence in over 35 countries and regions. In 2023, Fosun’s overseas revenue accounted for 45% of its total revenue with a 10-year compound annual growth rate of 55%. For Fosun, globalization means more than just “two-way engagement” between the global and Chinese markets. It extends to the endogenous development of its ecosystem enterprises both domestically and internationally, encouraging them to actively expand their businesses beyond their domestic markets.

Shanghai Henlius, the biomedical platform of Fosun Pharma, its self-developed and manufactured HANQUYOU (trastuzumab for injection) has been approved for sale and marketing in more than 40 countries and regions, making it the domestically-produced biosimilar drug with the highest number of market approvals. Shanghai Henlius’ first innovative drug HANSIZHUANG (serplulimab injection) was approved for marketing in Indonesia, becoming the first domestically-produced anti-PD-1 monoclonal antibody successfully approved for marketing in a Southeast Asian country. FTG’s Club Med has had sales and marketing operations in more than 40 countries and regions across six continents, and operated 68 resorts. The Yuyuan Garden Lantern Festival, a national intangible cultural heritage event that has been held for 29 consecutive years, successfully made its overseas debut in Paris, France, attracting nearly 200,000 local visitors. Fosun Insurance Portugal has continued to expand its presence in overseas markets such as South America and Africa. Its international business reported a premium revenue of EUR1.70 billion, representing a year-on-year increase of 10.6%.

As of 2024, Fosun has continued to focus on its core businesses and enhance its innovation capabilities, thus gaining greater recognition. On 12 April, the Shenzhen Municipal People’s Government and Fosun signed a framework agreement on strategic cooperation, with both parties gathering high-quality resources for innovation and further strengthening their cooperation in areas such as biomedicine, cultural and sports tourism, and fashionable consumption. In March this year, Fosun Pharma, together with Shenzhen Guidance Funds and seven other investors, planned to jointly establish a biomedical industry fund, with all proceeds to be invested in biomedical, cells, genes, etc. Shanghai Fujian Equity Investment Fund Management, a subsidiary of Fosun Pharma, was selected through public selection process in Shenzhen to exclusively manage this fund.

Sound financials with strong support from major banks

In the face of a complex and volatile global economic situation, Fosun has taken proactive measures to continuously optimize its capital and asset structure, expand financing channels, and reduce debt, providing a solid foundation for the execution of the company’s core strategies, which eventually its efforts have borne fruit.

In May this year, Fosun once again successfully obtained a syndicate loan of USD597 million.  This syndicated loan, the largest of its kind in the market thus far this year for a Chinese privately-owned enterprise, reflects the recognition of Fosun’s strong liquidity by domestic and foreign banks, further boosting the confidence of the market, partnering banks and creditors.

Following the release of Fosun’s annual results in March this year, several domestic and international institutions, including Citibank, UBS, Nomura, and Founder Securities, have published research reports expressing their bullish view on Fosun International’s steadfast execution of its strategy to focus on core businesses and strike a balance between investment and divestment. These institutions have assigned Fosun International a “Buy” or “Overweight” rating. In May 2023, the international credit agency S&P raised Fosun’s rating outlook to “stable”, recognizing Fosun’s financial strategy and the sustainability of future development.

The investment market generally expects that the successful sale of HAL’s banking business will further strengthen Fosun’s cash flow, allowing Fosun to focus more on its core businesses, promote its asset-light operations, and better navigate uncertainties to achieve counter-cyclical growth.

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