SoftBank to buy five percent stake in ZhongAn IPO Posted Sep 21, 2017 by Ruchika Sharma

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Mayoshi Son led SoftBank Group has agreed to buy a five percent stake in Chinese internet startup ZhongAn’s IPO. SoftBank seems to be putting its finger into almost every pie these days through their Vision Fund, a one hundred billion USD fund. It has been emptying out its Vision Fund’s warchest in the emerging technologies space and picking up quite a few deals on its way to build up an interesting portfolio, the latest being ZhongAn Online Property and Casualty Insurance Co. Ltd.

Armed with the very same Vision Fund warchest, SoftBank has agreed to be a cornerstone investor in Chinese internet startup ZhongAn’s IPO with one hundred ninety nine million shares on offer for its listing on the Hong Kong Stock Exchange.

SoftBank will buy a five percent stake which works out to seventy two million shares. The shares being offered are in the 53.7 HKD to 59.7 HKD price band. The stock is to list on the Hong Kong Stock Exchange with the ticker ZAOL.HK. If calculation is made basis the midpoint, the stake of Softbak would be  in the middle of the price range, i.e., 4.08 billion HKD or hundred and fifty million USD.

ZhongAn Online Property and Casualty Insurance Co. Ltd is a Chinese internet startup founded in October 2013 and headquartered in Shanghai. It operates in the fintech sector, more specifically the insuretech sector. It provides a range of online insurance products and solutions in the People's Republic of China.

The company offers property and casualty insurance products covering accident, bond, health, liability, credit, cargo, and household property insurance, as well as other insurance comprising shipping return policy insurance. It also engages in technology development and consulting activities.

ZhongAn is backed by marquee investors such as Jack Ma led Alibaba Group, Tencent Holdings, Morgan Stanley, China International Capital Corp. and Ping An Insurance Group. Alibaba's finance arm Ant Financial owns sixteen percent of ZhongAn.

The Deal

As part of the terms of the deal agreed upon by ZhongAn and SoftBank, SoftBank can make the investment into ZhongAn through one of its subsidiaries or affiliates which includes their one hundred billion USD Vision Fund. A spokesperson from SoftBank refused to comment on the portion to be funded by their Vision Fund.

A very interesting part of the deal is that ZhongAn was launched by Alibaba and and Ping An Insurance Group and Tencent Holdings, and SoftBank was an early investor into Alibaba. SoftBank recently sold 7.9 billion USD worth of Alibaba stock to pare off its own debt, thereby reducing their stake in Alibaba from thirty two percent to twenty eight percent. This was the first ever time that SoftBank has sold Alibaba shares since it had invested in the firm in 2000.

A press release from SoftBank’s office clearly states that ZhongAn is the market leader in China’s insuretech space and is poised to grow considering the extremely underdeveloped insurance market in China. ZhongAn, armed with cutting edge technologies, has been disrupting the insurance market since its inception in 2013 and building a robust and unique internet-only delivery model.

As per the company, it sold more than 7.2 billion policies since it was started and is serving close to four hundred and ninety two million customers. ZhongAn has managed to reach such a massive scale because of its cloud based tech system named Wujeishan.

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