06 October, 2009

Netherlands Bank Mergers & Acquisitions (ING Groep)

Photo: A Toronto commuter train carrying an ING Direct Canada advertisement.

ING Groep NV

ING can trace its history back to 1743 with the creation of Kooger Doodenbos, an organization that offered insurance policies for tradesmen, professionals, and widows and orphans against fire loss. Over the next 100 years, insurers like Kooger Doodenbos and others amalgamated and evolved into two large insurance companies, namely De Nederlanden van 1845 (created in 1845) and De Nationale Levensverzekeringbank (created in 1863). These two organizations combined in 1963 to form the Nationale-Nederlanden. The insurer expanded aggressively throughout the 1970s and 1980s by acquiring other insurers in the Netherlands and in North America.

The banking side of ING goes back to the 1881 founding of Rijkspostspaarbank (literally, the State Post Savings Bank), which was part of the Dutch postal service. In 1986, the Rijkspostspaarbank merged with De Postcheque- en Girodienst (established in 1918) to form the new Postbank. Then in 1989, Postbank and Nederlandsche Middenstandsbank (established in 1927) merged to form the NMB Postbank Group.

In 1990, deregulation in the Dutch financial services industry allowed for the first time mergers between insurers and banks. In 1991, insurance company Nationale-Nederlanden and banking company NMB Postbank merged to form the Internationale Nederlanden Groep. Almost right from the beginning, the financial market and the media abbreviated the name to I-N-G, which was subsequently adopted officially by the company itself.

In 1997, the first ING Direct bank (on-line banking) was launched in Canada, which was hugely popular with its self-serve, zero-fee, high interest rate savings account product. ING Groep soon expanded the ING Direct concept to Australia and Spain in 1999, France and the United States in 2000, Germany and Italy in 2001, Great Britain in 2003, and Austria in 2004.

Recent transaction(s):

  • In 1995, ING Groep bought Barings Bank for GBP 1. Barings, one of the most revered names in the merchant and investment banking world, went bankrupt when rogue trader Nick Leeson's speculative trades in Singapore led to a USD $1.4-billion loss. Unable to meet its margin obligations, Barings went into receivership. ING Groep, anxious to expand its investment banking and asset management business, paid a nominal GBP 1 to acquire Barings, and agreed to assume its debt and financial obligations to settle all outstanding transactions.
  • In 1997, ING bought the remaining 80% of Banque Bruxelles Lambert S.A. for USD $4.68-billion. ING had acquired an initial 20% stake of the Belgian bank in the early 1990s.
  • In 1998, ING acquired 49% of German on-line bank Allegemeine Deutsche Direktbank (DiBa).
  • In 2000, ING bought a 39.7% stake in a Savia subsidiary that held 71.6% of Seguros Comercial America (SCA) for USD $555-million. SCA was Mexico's largest insurer. As part of the agreement, ING had the right to increase its stake in the Savia unit to 49% after one year, and to acquire a controlling stake after three years.
  • In 2000, ING bought ReliaStar Financial Corp. of United States for USD $5.1-billion and assumed ReliaStar's USD $1.2-billion debt.
  • Later in 2000, ING bought the financial services and international divisions of Aetna Inc. for USD $5.0-billion and assumed those divisions' USD $2.7-billion debt.
  • In 2000, ING bought an additional 49% of Mexican pension fund manager Afore Bital for USD $196-million. ING had already owned 49% of Afore Bital before this latest acquisition.
  • In 2001, ING acquired an additional 19.7% of Poland's Bank Śląski (Slaski) for Eur 133-million. ING had already owned 55% of Bank Slaski prior to the tender offer. The Polish bank had 330 branches in the country.
  • In 2001, ING acquired an additional 45% interest in Mexican insurer Seguros Comercial America (SCA) for USD $791-million. After the latest purchase, ING’s stake in SCA was raised to 87%. ING subsequently made an offer to buy out other minority shareholders for USD $180-million, raising its stake in Seguros Comercial America to 99.91%.
  • In 2002, ING acquired an additional 24% stake in India's Vysya Bank for Eur 73-million from Indian conglomerate GMR Group. Following the purchase, ING would own 44% of ING Vysya Bank. ING first acquired a 20% stake in Vysya Bank through its Banque Bruxelles Lambert subsidiary.
  • In 2002, ING bougt an additional 21% in Allgemeine Deutsche Direktbank (DiBa) from a number of trade unions. ING would own 70% of DiBa after the acquisition.
  • In 2003, ING's 70%-owned German direct bank DiBa (Allegemeine Deutsche Direktbank) bought Germany's No. 2 direct bank Entrium for Eur 300-million. Entrium has 965,000 clients and assets of Eur 7.1-billion.
  • In 2004, ING sold its German subsidiary ING BHF-Bank to Sal. Oppenheim for Eur 600-million.
  • In 2005, ING acquired a 19.9% stake in Bank of Beijing, one of the more than 100 city-commercial banks in China, for Eur 166-million (USD $232-million, CNY 1.78-billion). Bank of Beijing had more than 8.2-million individual account holders and 124 braches in Beijing and Tianjin. In 2007, following the IPO of Bank of Beijing, ING's stake was diluted to 16.07%.
  • In 2007, ING Groep bought Turkey's Oyak Bank for Eur 2.0-billion (USD $2.67-billion) from the country’s armed forces pension fund. Oyak operated 360 branches across Turkey. Oyak Bank was created in 1984 by Ordu Yardislasma Kurunu, Turkey's armed forces retirement fund.
  • In 2007, ING bought Banco Santander's pension fund management business in Latin America for Eur 960-million (USD $1.3-billion). ING gained over Eur 13.8-billion (USD $19.9-billion) in assets under management in Mexico, Chile, Colombia and Uruguay.
  • In 2007, ING sold ING Insurance Belgium NV, its Belgian broker and employee benefits insurance unit, for Eur 750-million.
  • In 2007, ING acquired a 30% stake in Thailand's TMB Bank PCL for Eur 460-million (USD $674-million). TMB Bank had more than 5 million customers and 472 branches in Thailand.
  • In 2008, ING acquired Turkey’s private pension fund Oyak Emeklilik for Eur 110-million. Oyak Emeklilik had 150,000 clients.
  • In 2008, ING launched a public offer to acquire Germany’s largest independent residential mortgage distributor Interhyp AG for Eur 416-million. Interhyp distributed mortgage products from over 50 banks and had 38,000 closed mortgages.
  • In 2008, ING sold ING Seguros S.A. de C.V's non-life businesses (property & casualty and auto insurance, plus its Health and Life insurance lines) to France's AXA S.A. for Eur 1.0-billion (USD $1.5-billion).
  • In 2008, ING sold its reinsurance unit Nederlandse Reassurantie Groep NV (NRG) to Columbia Insurance Company for Eur 272-million. ING’s divestment of NRG was part of its plan to refocus on its core businesses in banking, investments, life insurance, and retirement services.
  • In 2008, ING bought CitiStreet LLC, a retirement benefit plan servicing business based in the U.S., for Eur 578-million (USD $895-million). CitiStreet provided record-keeping and administration services for retirement benefit plans and had been jointly-owned by Citigroup and State Street Corp.
  • On 2008-10-19, the Netherlands injected Eur 10-billion (USD $13.4-billion) to ING Groep. The government's purchase of non-voting subordinated bond came with no equity stake. The Dutch government would be entitled to annual coupon rate of up to 8.5% based on a complex formula. ING could either convert the bond into ordinary shares and pay back Eur 10-billion to the government after three years, or buy back the bonds from the Netherlands at 150% of the issue price at any time.
  • In 2008, ING sold its Taiwanese life insurance business ING Antai Life Insurance to Fubon Financial Holding Co. for Eur 447-million (USD $600-million, TWD $19.3-billion). ING first entered the Taiwanese life insurance market in 1987 but its returns had been unsatisfactory. ING intended to re-deploy the capital to its more profitable operations. ING Antai Life had 2.2-million clients and managed TWD $610-billion (Eur 14.1-billion) of assets. Fubon already had 6.5-million clients in Taiwan and the purchase would propel it to become the No. 4 insurer from the No. 6.
  • In February 2009, ING divested a majority of its Canadian insurance subsidiary ING Canada Inc. for CAD $2.16-billion (Eur 1.37-billion, USD $1.75-billion). ING had held about 70% of the ING Canada with the remaining 30% being held by public shareholders. Following the sale, ING Canada renamed itself Intact Insurance. ING Bank of Canada, the Canadian on-line banking unit of ING Groep was not part of the transaction and remained wholly-owned by ING Groep.
  • In September 2009, the EU’s review on the Dutch government’s state guarantees for ING ruled that the aid amounted to unfair subsidies. The Dutch government had agreed to buy Eur 22.2-billion (USD $32.2-billion) of ING’s U.S. “alternate-A” mortgage loans at a 10% discount to the par value of the portfolio. Similar loans were selling at a much bigger discount in the open market. The EU ruling could force ING to return several billion Euros to the Dutch government.
  • Also in 2009, ING sold its 51% stake in ING Australia and ING New Zealand to its partner ANZ Banking for Eur 1.1-billion (AUD $1.76-billion, USD $1.5-billion). The units sold were in the life insurance and wealth-management business. ING Groep and ANZ merged their Australian and New Zealand life insurance and wealth-management units back in 2002, with ING owning 51% and ANZ owning 49% of the combined units. Not included in the sale were ING’s other businesses in Australia: ING Direct, ING Investment Management, ING Wholesale Banking and ING Real Estate.
  • In October 2009, ING sold its Swiss wealth management business to Julius Baer Group Ltd. (Julius Bär) for CHF 520-million (Eur 343-million, USD $506-million). The unit managed CHF 15.15-billion (Eur 10-billion) of assets.
  • Also in October 2009, ING sold its Asian private banking business to Singapore's Overseas-Chinese Banking Corp. (OCBC) for SGD $2.04-billion (Eur 981-million, USD $1.46-billion). The business sold managed Eur 11-billion of assets in the Far East.
  • (See update in 2012) In late October 2009, ING reached a deal with the European Commission to garner approval for the state aid it received from the Dutch government. Under the deal, ING would (1) dispose of its entire insurance operations either by sales or by initial public offerings by 2013, (2) pay an additional Eur 1.3-billion (USD $1.95-billion) to the Dutch government for the Eur 22.2-billion of state guarantees, (3) raise Eur 7.5-billion (USD $11.25-billion) from a rights issue, and (4) dispose of its ING Direct USA on-line bank. The agreement essentially ended ING's bancassurance business model.
  • In December 2009, ING sold its 50% interest in Pacific Antai Insurance to China Construction Bank. Pacific Antai was a 50-50 joint-venture between ING and China Pacific Insurance.
  • In February 2011, ING sold its real estate investment management business to U.S. commercial real estate brokerage CB Richard Ellis Group Inc. for USD $940-million. The unit sold had Eur 65-billion in assets and operated in 20 countries.
  • In June 2011, ING Groep sold its American on-line bank ING Direct USA to Capital One Financial for USD $9.0-billion (Eur 6.3-billion). ING would receive USD $6.2-billion in cash and USD $2.8-billion in Capital One shares. Following the sale, ING would hold a 9.9% stake in the U.S. bank. ING Direct USA had over 7-million clients and USD $82-billion of deposits.
  • In August 2012, ING Groep sold its ING Bank of Canada to the Bank of Nova Scotia (Scotiabank) for EUR 2.52-billion (CAD $3.13-billion, USD $3.09-billion).  The sale gave ING Groep much needed capital to meet new, higher capital requirement following the global banking crisis in 2008. ING Bank of Canada had CAD $30-billion in deposits, $40-billion in assets, and 1.8 million clients.
  • In October 2012, ING sold its Malaysian insurance operations ING Insurance Bhd to Hong Kong-based AIA Group for USD $1.73-billion (HKD$ 13.4-billion, Eur 1.33-billion). ING Malaysia had 1.6 million clients. AIA was spun out of beleaguered U.S. insurer AIG in 2010.
  • Also in October 2012, ING sold its ING Direct UK to Barclays plc. ING Direct UK had 1.5-million clients, GBP 10.9-billion in deposits and GBP 5.6-billion of mortgage loans. Terms were not disclosed.
  • Later in October 2012, ING sold its Hong Kong, Macau and Thailand insurance operations to Hong Kong-based Pacific Century Group for USD $2.14-billion (Eur 1.64-billion, HKD $16.6-billion). Pacific Century is controlled by Richard Li, son of Hong Kong tycoon Li Ka-shing.  ING's Hong Kong and Macau insurance operations had 270,000 clients and the Thai operations had 300,000 clients.
  • In November 2012, ING won more time from EU to divest its insurance operations as required to accept state aid from the Dutch government.  Under the new deal, ING has until the end of 2015 to divest at least 50% of its European insurance operations, and until 2018 for the rest.  ING must dispose of at least 50% of its Asian insurance operations by 2013, and the rest by 2016.  As for the American insurance operations, 25% must be disposed by 2013, at least half by 2014, and the rest by 2016.  ING also agreed to pay Eur 4.5-billion back to the Dutch government by May 2015 for the Eur 3.0-billion it received in state aid.
  • In May 2013, ING Groep raised USD $1.46-billion (Eur 1.11-billion) from floating its U.S. life insurance, annuities and retirement products division.  The IPO offering represented a 29% stake in the business, now renamed Voya Financial.  ING Groep will gradually sell off the remaining 71% of Voya Financial by 2016.

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