Fosun, Prudential get cozier on investment

Partnership will build on existing joint ventures, moving into realty

China's Fosun Group, the parent company of acquisitive conglomerate Fosun International, has announced an agreement to forge a China-focused joint venture with US insurer Prudential Financial Inc.

The partnership, which builds on their existing joint venture in life insurance and investment management, follows a major buyout of a Portuguese insurance firm, as Fosun accelerates its international deployment in 2014.

The two companies, which began collaboration in 2011, intend to invest in "mixed-use development" property projects in growing urban centers in China, according to a company statement on Wednesday.

One focus is a compound retirement platform with products, services and educational resources aiming to help Chinese individuals and families in retirement better cope with challenges, the statement said.

The companies did not reveal the size of their investment in the venture, saying they expect to invest in projects through a combination of internal and third-party capital. They also expect to collaborate on real estate projects outside China.

The Chinese conglomerate and the second-largest US life insurer run two private equity funds and have co-invested in a 50-50 Shanghai-based life insurance joint venture, Pramerica Fosun Life Insurance Co, which started operations in 2012.

"The growth of China's urban centers and the aging of our population present significant opportunities for our two companies to help address economic and development issues of critical importance to China, drawing from our respective strengths in real estate, investment management and retirement," said Guo Guangchang, chairman of Fosun, in a news release.

Fosun's investment ability and deep understanding of the market in China will continue to enable Prudential Financial to achieve its goal of developing a successful long-term presence in China, said vice-chair of the US insurer Mark Grier.

The agreement was announced on the same day that Fosun reassured investors it has enough cash to fund the $1.35 billion purchase of the insurance arm of a Portuguese state bank. It said it will continue to buy foreign assets to expand its overseas reach.

The deal will give Fosun 80 percent of the equity from the insurance arm of Caixa Geral de Depositos SA of Portugal, but Fosun has yet to disclose how it plans to fund the purchase.

The real estate venture is the latest move by Fosun, which leverages insurance investments as a base for funding bigger projects.

Fosun is currently bidding to acquire French resort company Club Mediterranee SA, after paying $725 million for One Chase Manhattan Plaza in New York last year. It also obtained a 9.5 percent stake in Greece's largest jewelry retailer, Folli Follie, in 2011.

Liang Xinjun, chief executive officer of Fosun, told China Daily earlier the firm is looking for industries that in which Chinese market share will occupy 20 to 30 percent of the global industry in five to 10 years.

Elder care has become a lucrative business given that the proportion of China's senior citizens is expected to account for 34 percent of the country's total population by 2050, according to statistics from the China National Committee on Aging.

In a State Council guideline in September, the central government vowed to promote a "retirement services industry" by setting up specialized institutes and encouraging foreign and private investment in these services.

The sector has gained traction among domestic and international home operators. Chinese mainland developers, including China Vanke Co and Poly Real Estate Group, are building senior housing projects to tap the market potential.

"This year is likely to witness a string of directives on the implementation of elder care. We are likely to expect more competitors in the aging property market," said Zhu Zhongyi, vice-head of the China Real Estate Association.

Thanks to government support, privately invested facilities can expect lower barriers to entry and less red tape in business approval procedures in the areas of capital, premises and personnel, according to Qu Qin, managing partner of Law View Partners in Shanghai.

More incentives may include the "introduction tax preferential treatment, particularly with respect to business tax and corporate income tax", said Qu.