Portugal’s financial sector arouses China’s interest

The financial sector is expected to be the new focus of Chinese investment in Portugal, which in three years has involved close to 6 billion euros in energy companies and, more recently, insurance and health.
Chinese companies are now positioning themselves to acquire the main assets of the beleaguered Espirito Santo group, a part of the Portuguese banking system for over a century, with arms in Angola, Mozambique and South American countries and sectors such as real estate and agro-industry.
The Portuguese media reported last week that Novo Banco had reached an agreement in principle with Chinese investment bank Haitong Securities for the sale of Banco Espírito Santo de Investimento (BESI), a deal expected to be closed for about 400 million euros, according to daily financial newspaper Diario de Noticias.
The deal, pending approval of the Bank of Portugal and the European authorities, provides that chief executive, José Maria Ricciardi and remaining investment banking management team remain in office.
Haitong, which rose sharply on the stock exchange after the deal was announced, said the deal will “strengthen the internationalization of the company’s business strategy and extend its geographical coverage.”
Analyst Doug Young said in an article in the South China Morning Post that the operation is similar to the recent acquisition of Portuguese insurer Fidelidade by Chinese group Fosun, which along with CITIC “is the Chinese group that has made most acquisitions abroad in the last couple of years. ”
“This new operation from Haitong may be a new phase in the history of mergers and acquisitions abroad by second-line players in financial services in China,” said Young, who also expect ongoing consolidation in the Chinese financial industry to attract foreign investment soon.
The Portuguese press this week also reported Fosun was preparing a proposal, valued at 3.5 billion euros, to buy Novo Banco, the financial institution that holds the “healthy” assets of Banco Espírito Santo.
Speaking to Bloomberg, in October, Fosun’s financial director expressed interest in the Novo Banco, the sales process of which is due to begin in the next few days.
“We know Novo Banco. We will review all these investment opportunities. If it is good value for Fosun, we will take this into account. But not only Novo Banco,” said director Ding Guoqi.
The chairman of Novo Banco, Eduardo Stock da Cunha, reacted to interest from Fosun in a television interview, saying it was “good news” but that any interested party would have to “get in line” when the bank’s sale process begins.
Expressions of interest must be submitted by 31 December, and the sale process will only be carried out in the second quarter of 2015.
Fosun this year acquired Portugal’s largest insurer, Fidelidade, for 1.635 billion euros and, via this insurance company, acquired healthcare company Espirito Santo Saude (now called Luz Saude) for 478.5 million euros.
Over the past three years, Chinese companies have invested 5.65 billion in mergers and acquisitions of Portuguese companies, about 40 percent of total M&A activities in the country.
The bulk of Chinese investment went to energy, with investment of 3.43 billion euros in the purchase of shares in Energias de Portugal (EDP), REN and the assets of renewable energy company EDP Renováveis. MDT/Macauhub