ING Raises $2.1 Billion With IPO of NN Insurance Business

Jul 02, 2014 7:40 am ET

(Updates with NN CEO comment in 10th paragraph.)

July 2 (Bloomberg) -- ING Groep NV, the biggest Dutch financial services company, raised 1.54 billion euros ($2.1 billion) from the sale of shares in its insurer NN Group NV, the second-biggest initial public offering in Europe this year.

NN Group opened at 21 euros in Amsterdam, above the sale price of 20 euros, and traded at 21.64 euros as of 1:20 p.m. ING sold 77 million NN Group shares, it said yesterday. Including a conversion of 450 million euros in mandatory exchangeable notes under an agreement with three Asian investors, gross proceeds were about 2 billion euros.

The sale of 28.6 percent of NN Group, with operations in Europe and Japan, brings ING closer to the end of a restructuring program imposed by European Union regulators following a 2008 rescue from the Netherlands. It will use the proceeds to pay debt and further unwind into a bank and insurer.

“Today’s announcement marks a very important event for ING and underscores again that the company will soon complete its restructuring story,” Lemer Salah, an Amsterdam-based analyst at SNS Securities, said in an e-mailed report today. “We remain bullish on the stock given its numerous positive triggers and strong market position in Europe.”

JPMorgan Chase & Co., Morgan Stanley, Deutsche Bank AG and ING Bank managed the NN Group offering. It is Europe’s second- biggest IPO this year behind a sale by AA Ltd., according to data compiled by Bloomberg.

Market Value

ING shares rose 0.4 percent to 10.53 euros, giving the company a market value of 40.5 billion euros. The Stoxx Insurance 600 Index, a gauge of 38 European insurers, rose 0.6 percent.

ING had said that it would offer 70 million NN shares for 18.50 euros to 22 euros apiece. It increased the offering to meet “significant investor demand,” according to a statement yesterday. The offer price values NN at 7 billion euros.

NN was the biggest life insurer in the Netherlands, based on 2012 gross written premiums, and the largest provider of mandatory pensions in Poland and Romania, according to a prospectus published on June 17.

Operating profit before taxes in the ongoing businesses was 905 million euros last year and 295 million euros in the first quarter. NN plans to expand earnings on that basis by 5 percent to 7 percent on average in the medium term and pay a dividend of 40 percent to 50 percent of the result from 2015, according to the document. The firm plans a first 175 million-euro payout to shareholders over the second half of this year.

“We do have a unique feature which is a combination of cash generating and growth businesses, and asset management activities.” NN Chief Executive Officer Lard Friese told reporters today. “We believe that gradually the European macro- economic backdrop will improve.”

ING’s Stake

ING’s ownership may shrink to 68.1 percent if underwriters fully exercise an option to buy as many as 11.6 million additional NN shares, the firm said yesterday.

The company, led by Chief Executive Officer Ralph Hamers, agreed to sell more than half of NN by the end of next year and complete the disposal of its entire global insurance operations by the end of 2016. To do that, it will also have to unwind a remaining stake of about 43 percent in Voya Financial Inc. in the U.S.

ING, which will continue as a Europe-focused bank after the restructuring, said on June 27 it sold a remaining 10 percent stake in Brazil’s Sul America SA through a block trade for about 170 million euros.

The Dutch government came to the rescue in 2008 with a 10 billion-euro capital injection after ING was hit with losses on assets backed by U.S. mortgages during the financial crisis.

--With assistance from Fred Pals in Amsterdam.