Temasek eyes AXA China stake, valued at $1.05 billion

First-round bidding for Beijing-based Taikang Life is due on Friday, with AXA expecting to close the deal before the end of this year, the sources, who are directly involved in the auction, told Reuters on Monday.

Taikang's total assets are worth $28.12 billion, according to an auction-related document obtained by Reuters.

The sale document says that Taikang has a 7.9 pct market share in China's life insurance market as of 2008, ranking Taikang No.4 behind China Pacific Insurance (Group) Co Ltd, which is already partly owned by the U.S. buyout giant Carlyle Group CYL.UL.

The document also says that French insurer AXA's 15.6 stake is worth $1.05 billion and Taikang's 2008 net income reached $247 million.

"This price is just for bidders' reference and I am pretty sure the final price can be higher than that as the competition for the deal among these big names like Temasek is going to be very tough," said one source.

AXA officials in Hong Kong, and private equity firms Blackstone and KKR were not immediately available for comment. Temasek said it did not comment on market speculation.

The sources told Reuters on October 22 that AXA had hired Morgan Stanley (MS.N) to advise on the sale.

According to the sale document, another Singapore investment fund, Government of Singapore Investment Corp. GIC.UL, already owns 8 percent of Taikang Life.

The sources and the person who provided the document, who was also directly involved in the auction, were not able to speak publicly about the process.

CHINESE INSURERS

Foreign firms began investing in China's insurance sector about a decade ago with the likes of HSBC Holdings Plc (HSBA.L) (0005.HK), Morgan Stanley (MS.N) and Goldman Sachs (GS.N) among the early birds.

For example, HSBC now holds a nearly 20 percent stake in Ping An Insurance (Group) Co of China Ltd (601318.SS), China's No. 2 life insurer.

China Life Insurance Co Ltd (601628.SS) is the market leader in the vast country where the Communist government encourages local people to buy insurance as Beijing is reforming its healthcare system for the sake of social stability.

Citigroup Inc (C.N) once tried to invest in China Life but failed some years ago, according to Chinese media reports.

In 2005, a Carlyle-led consortium bought a 25 percent stake in China Pacific, the country's No.3 life insurer, for $409 million.

Shanghai-listed China Pacific is preparing a Hong Kong listing this year, allowing Carlyle to exit from its investment. Taikang has also said it planned to go public without giving a specific timeframe.

AXA acquired Switzerland's Winterthur in 2006 and through that deal got its stake in Taikang.

AXA is now the largest single shareholder of Taikang but the sources said AXA has little control over management decisions at Taikang and tensions between AXA and Taikang's current chairman and chief executive Chen Dongsheng, backed by other major Chinese shareholders, have been growing in recent years.

Chen and his associates owned a combined 14 percent stake in Taikang, whose shareholders also include big Chinese state-owned enterprises CITIC Group and Sinopec, according to the document.