December 6, 2016 / 7:56 AM / in 8 months

Fosun's $3 bln U.S. sale is an orderly retreat

3 Min Read

A Chinese national flag (L) flies in front of a building of the headquarters of Fosun International, in Shanghai, China, March 29, 2016.Aly Song

BEIJING (Reuters Breakingviews) - Fosun's sale of U.S. insurer Ironshore shows one of China's most aggressive dealmakers knows how to get out while the going is good. The $3 billion sale to Liberty Mutual will help Fosun slim down and sharpen its focus on emerging markets. As president-elect Donald Trump's team steps up its China-bashing, the U.S. will only become harder for mainland firms to navigate.

In June, Fosun announced plans to float Ironshore, just months after taking full control of the specialty property and casualty insurer. That looked like an abrupt volte-face given the conglomerate's repeated assurances that it wants to continue expanding its insurance business and remains committed to investing in the United States. 

Leaping on the opportunity to sell Ironshore at a profit though isn't bad news. Fosun has gone on a debt-fuelled global deal spree, including buying trophy assets such as Canada's Cirque de Soleil and Club Med. S&P Global Ratings and Moody's Investors Service, which both have "junk" credit ratings on the Hong Kong-listed group, have called on Fosun to slow down.

Ironshore unit Wright & Co had also got Fosun into hot water with U.S. authorities, since it provided professional liability coverage for Central Intelligence Agency staff and others. Fosun sold that unit in September. If anything, the Trump era will probably mean Fosun and its rivals face greater scrutiny in future.

Some bidders began circling Ironshore after the company filed for an initial public offering. This quick flip seems to have worked out well for Fosun, since it spent $2.3 billion to acquire the whole company over two years. The Chinese group said the sale will yield an after-tax gain of $310 million.

Fosun is still snapping up assets in emerging markets, circling $1 billion of Brazilian hospital assets and a stake in Russian investment bank Renaissance Capital, after a $1.3 billion splurge on India's Gland Pharma in June. Given that background, ratings agencies will probably need to see more evidence Fosun is selling as well as buying. The Ironshore sale looks like a step in the right direction.

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