Alibaba, Tencent chairmen buy Ping An shares

The founders of Alibaba and Tencent bought shares in Ping An Insurance on Sunday, in a move that puts Ping An, China's second-largest insurer, in pole position to seize market share in China's fast-developing internet finance sector.

In Hong Kong's biggest standalone equity fundraising this year, the company raised HK$36.5bn ($4.7bn) on Sunday in a private placement of new shares with up to 10 investors, the company said in an exchange filing.

The investment is the latest to be made jointly Jack Ma and Pony Ma, China's two most famous internet entrepreneurs. Jack Ma, founder and chairman of Alibaba Group, made a personal investment in Ping An, a source at Alibaba told the Financial Times, while financial magazine Caijing reported that Pony Ma, founder and chairman of Tencent Holdings, also bought shares. It is unclear how much either man bought.

Privately owned Ping An, which controls separately-listed Ping An Bank, has been among China's most aggressive groups in pursuing internet finance ventures. Its affiliates include Lufax.com, the peer-to-peer lending platform, and online payment company 1qianbao.com.

"Ping An has been actively trying to shift its business model towards internet finance. And the other two have been looking to build up more brick and mortar businesses to support the expansion of their internet ventures," said Li Jun, insurance analyst at Changjiang Securities in Shanghai.

"Those two can offer access to their huge user bases and marketing channels, while Ping An can provide products and funding support."

Last month, Ping An's property affiliate teamed up with China Vanke, the country's largest property developer, to offer a Groupon-style property investment product. Investors contribute money towards the purchase of at least 216 Vanke-built apartments. If the product reaches its fundraising goal, investors earn discounts on buying flats for themselves and preferential access to desirable properties, in addition to a financial return on the investment.

Ping An's capital raising is one of the largest ever uses of a private placement in Hong Kong and marks a new milestone in Chinese groups' increasing use of the funding tool. If they are able to place shares with 10 or fewer investors, the mechanism allows companies to escape a "tax" which would require them give 10 per cent of the new issuance free to China's National Social Security Fund.

"[Ping An] says these deals can get done in this size, and shows capital is being deployed into China," said one senior equity market banker, who expects more such deals.

Listed Chinese companies have raised a record $16.1bn of fresh funds via secondary offerings in Hong Kong this year, according to Dealogic.

The involvement of China's biggest technology founders is the latest investment collaboration between the "Three Mas", a group that includes Jack Ma, Pony Ma and Ma Mingzhe, Ping An chairman.

The trio invested in Huayi Brother Media, a film and television production company, in a collaboration between Alibaba and Tencent, in November. In 2012 the group co-invested in a new web-based property insurance company, Zhong Man Insurance.

While the Huayi investment was a co-operation between Alibaba and Tencent, Zhong Man was a personal investment by the men.

Tencent did not respond to a request for comment. Ping An could not be reached for comment. Morgan Stanley acted as sole global co-ordinator for the deal.

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