DataRoom AM: AMP’s China play

AMP lands a significant stake in China’s largest pension firm, while NAB looks to shed its troubled British operations.

After chipping away at China for close to two decades, AMP has managed to take a landmark stake in the nation’s largest pension firm -- and the deal is more meaningful than the price tag suggests.

Elsewhere, NAB plans its exit from the UK, Coca-Cola Amatil looks to Indonesia, and AustralianSuper appears to have gone sour on its private equity investments.

First up, don’t let the relatively small $240 million valuation fool you -- AMP’s agreement to buy a 19.9 per cent stake in China Life Pension is significant. Not only will AMP become the first foreign company to own equity in a Chinese pension firm, it will also be exposed to one of the fastest-growing pension markets in the world.

AMP, which has operated in China since 1997, notes that the nation’s pension market has grown 26 per cent per annum in the past five years, to around $100 billion. It’s also tipped to be balloon to $700 billion by the end of the decade. That's a big opportunity.

The deal is no small feat for a local financial group, which has been developing formal ties with CLPC’s parent, China Life, since 2005. The companies signed a memo­randum of understanding for strategic co-operation in August 2009, and then formed a joint venture, China Life AMP Asset Management Company, in September last year. There’s a sense that the CLPL deal was a long time in the making.

After years of speculation, National Australia Bank has finally formalised plans to offload its troubled British operations.

Spurred by a big fall in returns, NAB’s new chief Andrew Thorburn said the lender intends to sell the underperforming Clydesdale and Yorkshire banking divisions that have long weighed on profits. The move follows similar divestments of legacy assets including US subsidiary Great Western Bank and a folio of bad British property loans.

Sources tell the Australian that investment banks have yet to be appointed to the sale, but Morgan Stanley and Goldman Sachs have previously worked on exit options. An IPO is considered the most likely choice.

NAB is staying quiet on the timing of the deal, but there is no indication that Thorburn is in a hurry. Expect him to hold out for the right price.

Coca-Cola Amatil is also looking beyond its home market, proposing to take a $US500 million ($541 million) investment from The Coca-Cola Company to help fund expansion in Indonesia.

Under the deal, which still needs CCA shareholder approval, TCCC would take a 29.4 per cent stake in the Australian company’s struggling Indonesian operations. While CCA will cede some control of the franchise, the money raised will be put toward making the Southeast Asian business a success.

CCA chief Alison Watkins hailed the deal as a “tremendous outcome,” but some analysts are questioning why the company would sell part of its Indonesian arm if it is still confident in the growth potential. Shareholders will have their say in February. 

In superannuation, AustralianSuper is reportedly set to offload about $1 billion worth of private equity investments in an effort to keep management expenses under control.

According to the Australian Financial Review, AustralianSuper has hired America’s Cogent Partners to auction off the exposure. Sources tell the newspaper the portfolio includes investments in Australia and overseas, as well an exposure to Melbourne-based asset-management giant Industry Funds Management worth at least $500 million.

Meanwhile, Leighton Holdings’ $3 billion asset selldown is thought to be progressing -- albeit slowly. 

The Australian reports the sale of Leighton Properties to Singapore-based City Developments is nearly done, in a deal that would see existing management retain their jobs. Advisors Bank of America could fetch $500 million for the division, sources say.

Elsewhere, AGL Energy has priced $600 million of senior unsecured, medium-term notes to repay a debt bridge facility for buying Macquarie Generation. The seven-year deal was more than four times oversubscribed from the initial launch volume of $200 million.

Finally, Nine Entertainment has confirmed it’s running the numbers on outdoor advertising company oOh!Media, following reports the pair was in discussions. Nine says it will update the market if any agreement is reached.

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