China Life is in advanced talks to buy between 5% and 10% of Logicor from its soon-to-be owner China Investment Corporation.
CIC’s purchase of the €12.25bn (£11bn) logistics business from Blackstone is due to complete next month and the sovereign wealth fund is looking to line up a deal to syndicate equity in the business to take place on or shortly after its conclusion.
The deal would be worth between €612.5m and €1.2bn based on the initial purchase price from Blackstone, dependent upon the final stake sold.
Logicor’s new owner is yet to determine the exact amount it is looking to syndicate to China Life or in total, with further deals with other Chinese-based investors still possible.
As a government-controlled entity, CIC is in a unique position to move capital offshore without coming up against state capital restrictions and having access to substantial foreign currency reserves.
As a result of these advantages, it may be able to syndicate stakes at a premium to the price it is paying.
The deal comes at the same time as a clampdown on the rapid expansion of Chinese conglomerates and insurers overseas and heightened capital controls.
The Chinese government is concerned over the systemic risk such investors pose to its economy and the impact they are having on its foreign reserves.
Anbang, HNA, Dalian Wanda and Fosun have been the main focus of the government’s scrutiny thus far.
A source close to CIC said: “It is a very politically sensitive time, more than any other.
“There are many insurers wanting to do this and, in principle, a deal is made easier because CIC is government-controlled but it puts you in the spotlight.
“CIC obviously holds a far superior position in any deal and you have to go through all of the approval process with them and with the government.
“Is now really the time that you would want to be doing that?”
China Life has been a prolific investor into overseas real estate in the past three years.
Most notably, last October it led a group of investors that bought a $2bn stake in a portfolio of 280 hotels in the US from Starwood Capital.
One of the main initial drivers for CIC to syndicate equity relates to real estate transfer tax in Germany.
If more than 95% ownership of a property is transferred to a new single entity taxation has to be paid to the relevant state of around 6.5%.
The value of Logicor’s German portfolio is in excess of €2bn, meaning the potential tax bill would be more than €130m. This can be avoided by bringing in a partner such as China Life for at least 5%.
Eastdil Secured and Goldman Sachs are advising Blackstone on the sale of Logicor. Cushman & Wakefield and KPMG are advising CIC.
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