Malaysian Sovereign Fund Weighs Bid for Insurance Unit of Hong Leong Financial

Khazanah Nasional Bhd., the $27 billion Malaysian sovereign fund, is weighing a bid for control of the insurance operations of billionaire Quek Leng Chan’s Hong Leong Financial Group Bhd., people with knowledge of the matter said.

Khazanah is considering an offer for Hong Leong Financial’s 70 percent stake in Hong Leong Assurance Bhd. and its 65 percent holding in Hong Leong MSIG Takaful Bhd., according to the people. A bid could be valued at about 3.2 billion ringgit ($799 million), one of the people said, asking not to be identified as the information is private.

Any purchase would add to $10.3 billion of insurance acquisitions in Southeast Asia in the past five years, data compiled by Bloomberg show. Khazanah said in 2014 it’s seeking more insurance investments in Asia, which would add to holdings in domestic companies including some of the biggest banks, power producers and wireless operators.

“Hong Leong Financial’s shareholders will immediately get a windfall if the deal is done,” James Lau, a Kuala Lumpur-based investment director at Pheim Asset Management Asia Sdn., said by phone Tuesday. “For Khazanah, it probably sees the purchase as a good opportunity to invest in a profitable business.”

Shares of Hong Leong Financial rose 0.9 percent, the most in more than a week, to 15.20 ringgit at 4:38 p.m. Tuesday in Kuala Lumpur. The benchmark FTSE Bursa Malaysia KLCI Index declined 0.1 percent.

Islamic Products

Hong Leong Financial said last month that Malaysia’s central bank had no objection to it starting talks with “certain parties” on the sale of its stakes in the two insurance units. Quek, who is chairman of Hong Leong Financial, ranks as Malaysia’s fifth richest person with a net worth of $4.3 billion, according to the Bloomberg Billionaires Index.

A representative for Khazanah declined to comment. Tan Kong Khoon, the chief executive officer of Hong Leong Financial, didn’t immediately answer a call to his office seeking comment.

Fairfax Financial Holdings Ltd., the Canadian investment firm led by Prem Watsa, said last month it will buy 80 percent of Indonesian financial group PT Paninvest’s non-life insurance unit for $161 million, according to the Bloomberg-compiled data. Hong Kong billionaire Richard Li’s FWD Group agreed in June to acquire the Vietnamese life insurance arm of Great Eastern Holdings Ltd. for S$48.2 million ($35.7 million).

Japan’s Mitsui Sumitomo Insurance Co. bought 30 percent of Hong Leong Assurance in 2010, before adding a 35 percent stake the next year in Hong Leong MSIG, which offers Islamic insurance products.

Khazanah investments had a net asset value of 109 billion ringgit at the end of December, compared with 110.7 billion ringgit a year earlier, according to the fund. It partnered with Sun Life Financial Inc. in 2013 to buy control of an insurance venture between Aviva Plc and CIMB Group Holdings Bhd. for 1.8 billion ringgit. The same year, Khazanah agreed to purchase 90 percent of Turkish insurer Acibadem Saglik ve Hayat Sigorta AS for $252 million.