Fosun plans asset sales in reversal of M&A spree

Construction workers walk past a building of the headquarters of Fosun International, in Shanghai, China, Dec 14, 2015. [Photo/Agencies]

Fosun Group, one of China's most acquisitive conglomerates, is preparing to sell as much as 40 billion yuan ($6 billion) in assets as it turns its focus toward raising its credit rating to above junk.

As it steps back from the more than $15 billion in overseas purchases made or announced since 2010, the group plans to disclose the disposals between now and the end of 2017, Liang Xinjun, chief executive officer of flagship unit Fosun International Ltd, said in an interview aired on Bloomberg Television on Monday.

"We will sell assets to repay debts," Liang, 47, said in Shanghai. "We have ample capability to get investment grade ratings. So either strategically, or tactically, Fosun is crystal clear that this has become our strategy."

Fosun's dwindling appetite for foreign trophies - it owns Club Med, Wall Street's 28 Liberty building and Cirque du Soleil - makes it an outlier at a time when the likes of China National Chemical Corp and Dalian Wanda Group Co are pushing Chinese companies to their biggest-ever year of overseas acquisitions. Rather than joining the fray, Fosun is focusing on getting leaner before its next phase of growth.

Liang is one of the three founders running the insurance-to-mining conglomerate - the other two being Chairman Guo Guangchang and President Wang Qunbin - who spoke on July 24 with Bloomberg in a wide-ranging interview on topics ranging from their ambitions of turning the company into a $100 billion behemoth to the impacts of a possible Donald Trump presidency and Brexit. Guo, whose brief disappearance in December triggered a rout of Fosun shares, signaled the group will move away from centralized leadership.

As to the disposals, Liang pointed to about 30 billion yuan to 40 billion yuan in assets such as properties, bonds, and stock holdings that could be sold off. Fosun could part with more than that if it chose to because the company had 118 billion yuan of assets available for sale at the end of 2015, of which 102 billion yuan were parked in listed shares and bonds.

So what will they sell? The executives declined to say but Fosun's focus is shifting toward healthcare, finance and leisure. That means businesses such as steel and mining - which accounted for 73 percent of profit when the company went public in 2007 - are ripe for consideration to be sold.

Last year, Fosun sold stakes in Nanjing Iron & Steel Co and cashed out of Shenzhen-listed Focus Media Information Technology Co. The group is also pushing for initial public offerings of its units, including the tourism business that operates Club Med, Cirque du Soleil and UK travel group Thomas Cook, according to Liang.

Behind the motivation to sell are debt ratings. Fosun International is rated three levels below investment grade at Moody's Investors Service and two notches under the threshold at S&P Global Ratings.

Emerging from the junk stigma, which would benefit its key insurance business, has become such a priority for Fosun that the group elevated it last year as one of its top five strategies, according to Liang.

Bloomberg