Uncertain Prospects for Investment Growth in Private Sector

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Ping An Insurance Group Co. (SH.601318; HK.2318) general manager Zhang Zixin said the insurer should have no problem in obtaining approval for a proposed stake purchase in Shenzhen Development Bank Co. (SZ.000001).

"Though Newbridge has some SDB shares that have not come out of lock-ups, it will not block the deal from winning approval as Ping An Insurance is a strategic investor in the bank and is not likely to sell the stake on the secondary market in the short term," Zhang told a media teleconference on June 15.

On June 12, SDB said it had signed an agreement to issue 370 million to 585 million new shares via a private placement to Ping An Insurance, at 18.26 yuan per share, in a bid to significantly improve its capital adequacy

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The insurer will also buy 520.4 million shares in SDB from Newbridge for 11.4 billion yuan in cash, or the issue of 299.1 million H shares to Newbridge, with the payment method to be decided by Newbridge.  

Among the shares Newbridge holds in SDB, 317 million shares are subject to a five-year lock-up period, with the holding period on 136 million shares due to expire on June 20 and the remainder to expire by June 20, 2010.

SDB will hold a shareholder meeting on June 29 to vote on the private placement while the deal between Ping An Insurance and Newbridge will be voted on at the insurer's shareholder meeting in August.  

Ping An will use funds from its life unit to purchase the SDB stake, said Zhang.

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He added that Ping An Insurance has no timetable for the new H-share issue to Newbridge.

Ping An chief financial business officer and Ping An Bank president Richard Jackson said separately on the teleconference that the Ping An Insurance banking unit can cooperate with SDB in many ways, including sale of Ping An life insurance products.

The two lenders also complement each other's business as SDB has experience in trade financing, especially in supply chain financing, with Ping An Bank focusing more on retail banking and credit card services.