BIDV Insurance seeks advisor to find strategic investor

BIDV Insurance Corporation (BIC) is looking for a financial advisor to help find a strategic investor, Chairman Pham Quang Tung said.

The Vietnam-based company needs a competent and experienced advisor to handle the strategic partnership plan, Tung said. It has received interest from several investors and is now exchanging information. It is also planning to sell shares on the stock market this year.

Under the current regulations, BIC can sell up to a 20% stake to a strategic partner, Tung said. However, it could seek regulatory approval later to increase the investment limit to more than 20% as other companies have done in the past, the chairman added.

The insurer is seeking an overseas strategic partner with a global perspective to help it improve competitiveness and increase presence in the international and domestic insurance markets.

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When investment banks see a piece of news like this they generally have one of two possible reactions:
1) This is such a small deal, we got way better deals in the pipeline, screw this; or
2) GUYS GUYS, these guys are calling out for advisors! Let's get all over it RIGHT AWAY.

I'll also let you guys in on another secret. It is not insider information type secret but it is a secret nonetheless because you probably don't know it. And it is only by giving you information that you don't already know that I have any hope of keeping you coming back to this blog for more every day. Here goes: BIDV Insurance intends to issue new shares in the near future.

What does this mean for the investment bank? Well. It means that if they successfully help BIDV Insurance find a global strategic pre-share issue investor, they will quite likely be mandated again for the share issue in one role or another. Let's run some quick numbers:

In 2009, BIDV Insurance had a net profit of approximately USD4mn. Assuming a P/E of 12.5x (fair ratio relative to insurance companies in the Asia Pacific region), its implied equity value is USD50m. Which means for the investment bank, the indicative revenue generation is as follows:

1) Strategic investor placement of 20% stake (worth approx. USD10m) will generate approximately 1% advisory fee, which is USD100,000.
2) New share issue to raise proceeds of USD15m (approx. 30% of company) will generate approximately 5% IPO fee (the IPO fee is highly debatable, but 5% is reasonable), which is USD750,000. Your investment bank probably won't get all of this because there will likely be a syndicate, so let's assume you get a little more than half, which is USD400,000.

That totals approximately USD500,000 in revenues. Actually I must say I am rather disappointed at the low advisory revenue figure, but I suppose it should be expected given that the whole company is only worth around USD50mn anyway. Bottom line though, USD500,000 of revenues is not so bad for 2-3 months work on a small deal.

I am going to stop here for today because there is no doubt in my mind that there will be further developments on this in the near future. I will write about the company and the deal in more detail then.