Will NDB too exit following Aviva?
The planned sale of British insurer Aviva’s stake in Sri Lanka’s NDB –Aviva Insurance is likely to be announced soon with Hong Kong based insurance giant American International Assurance (AIA) reaching the final stages of negotiations for the purchase of 51% stake held by Aviva.This is as part of Aviva, Britain’s second largest insurer’s announcement earlier to sell underperforming businesses globally partly to raise money to protect against its euro zone exposure which is bigger than that of its rivals, Reuters news wire reported earlier.
It was also reported earlier that AIA Group, Prudential Plc and Manulife Financial Corp would be the most likely bidders for Aviva’s stake in the Sri Lankan joint venture. However the sources said that a few local parties such as top business man Harry Jayawardena and Janashakthi Group also were interested in it, but Aviva had taken a policy decision to sell its stake to a major international player.
When bids were called in July seven parties had collected offer documents from Morgan Stanley in Hong Kong who were the investment bankers appointed to handle the deal, the insurance sources said.Aviva NDB Insurance which is believed to be the second largest life insurer in Sri Lanka generated 12.8 million rupees in revenue last year and earned a post-tax profit of 691.6 million rupees.
The company had a market value of Rs .8.4 billion based on Thursday’s day’s close, which would give Aviva’s 51 percent stake a valuation of Rs.4.2 billion.
The NDB Bank through its subsidiary Capital Development and Investment Company (CDIC) controls a stake of 41.6% in Aviva NDN Finance Lanka (ANFL) while Aviva Asia Holdings owns majority stake of 58.4%. ANFL in turn has a stake of 87.3% of Aviva NDB Insurance while NDB Bank independently has another stake of 5%.
At the end NDB directly and indirectly has about 41% of Aviva NDB Insurance while Aviva Asia Holdings has about 51%.
Now the question which is being asked in the market circles is whether NDB will continue to hold their stake or whether they will sell off their stake as well to the buyer of the Aviva share. (GA)