The FINANCIAL — ING Group plans to sell approximately 33 million shares of common stock of ING U.S., Inc., representing a stake of approximately 12% in its U.S.-based retirement, investment and insurance subsidiary. ING Group intends to use the proceeds of the planned transaction for the reduction of ING Group core debt, according to ING.
"With this planned sale, we deliver on our agreement with the European Commission to further reduce our stake in ING U.S.in 2014 and accomplish another important milestone in the restructuring of ING Group while receiving proceeds to further reduce ING Group core debt," said Ralph Hamers, CEO of ING Group.
In connection with this planned sale, ING U.S. has filed an update of its registration statement with the U.S. Securities and Exchange Commission (SEC). The amended registration statement now covers approximately 26 million shares to be offered in an underwritten public offering (not including the shares subject to the option described below). The amended registration statement also includes information on the agreement between ING Group and ING U.S. under which ING U.S. may repurchase shares of its common stock from ING Group having a value of USD 250 million. The precise number of shares to be repurchased will be based upon the net price received by ING Group in the underwritten offering. Based upon the closing price of ING U.S. shares on the New York Stock Exchange on March 14, 2014, ING U.S. would repurchase approximately 7 million shares from ING Group, according to ING.
The sale of the total of approximately 33 million shares in the offering and the repurchase, which transactions if they are completed, would reduce ING Group's stake in ING U.S. to approximately 45% from approximately 57% at year-end 2013. As part of the planned offering, ING Group would grant the underwriters for the offering an option to purchase up to approximately 4 million additional shares, which, if fully exercised, would further reduce ING Group's stake in ING U.S. to approximately 43%. The final timing, size and price for the planned offering and repurchase remain subject to market and other conditions.
Upon a successful completion of these transactions, the retained minority stake of ING Group in ING U.S. will be deconsolidated and will going forward be accounted for as an associate using equity accounting. This would fulfil ING Group's requirement under the terms of the restructuring agreement with the European Commission to divest at least 50% of ING U.S. and deconsolidate this business before year-end 2014.
The IFRS book value of ING Group's 57% stake was approximately EUR 5.5 billion at 31 December 2013. Assuming deconsolidation of ING U.S., the sale of 33 million shares would result in an estimated negative after-tax P&L impact of approximately EUR 2 billion to be booked in ING Group's First Quarter 2014 Results. This amount broadly reflects the difference between the IFRS book value at year-end 2013 and the market value of ING Group's 57% stake in ING U.S., and includes the release of corresponding revaluation reserves causing a loss of approximately EUR 300 million. The actual amount of any impact on the P&L and Shareholders' equity of ING Group may differ from these estimates and will depend on the pricing, the exchange rate, the ING U.S. stock price, and the IFRS book value at the date of the transaction. This planned sale will not have an impact on the capital position of either ING Bank or NN Group.
ING Group has previously announced its intention to divest its remaining stake in ING U.S. over time, in line with its strategy to separate and divest its insurance and investment management businesses. In this context, ING Group sold shares of ING U.S. through an initial public offering in May 2013 and a follow-on offering in October 2013. If this offering is completed, any sale of ING Group's retained ING U.S. shares is expected to be subject to a lock-up period of 90 days from the pricing of the offering (subject to certain exceptions and the underwriters' ability to waive lock-up restrictions). ING U.S. shares trade on the New York Stock Exchange under the ticker symbol "VOYA", according to ING.
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