(Reuters) – China Cinda Asset Management said on Thursday it plans to scrap an agreement to buy a 20% stake in the consumer finance arm of Ant Group, worth 6 billion yuan ($943.83 million).
The investment would have increased Cinda’s interest in Chongqing Ant Consumer Finance Co Ltd to 24%, making the asset manager its second-biggest investor.
Cinda effectively owns a 15% stake in the Ant-affiliated firm through Nanyang Commercial Bank Ltd, a Cinda subsidiary. The stake would have been diluted to 4% after the investment.
“After further prudent commercial consideration and negotiation with (Chongqing Ant Consumer Finance), the company proposed not to participate in the share subscription,” Cinda said in a filing to the stock exchange.
Ant Group’s consumer finance arm is under regulatory pressure to fold Ant’s two lucrative micro-loan businesses Jiebei and Huabei into it, which would make it subject to rules and capital requirements similar to those for banks.
Cinda, one of the country’s four biggest state asset managers, said the withdrawal would not have any material impact on the company.
Chongqing Ant Consumer Finance said in a statement that it “fully respects the business decision made by its investor,” adding, “under the guidance of regulators, the company will actively hold discussions with investors… and ensure the rectification work on the consumer finance business is effectively carried out.”
($1 = 6.3571 Chinese yuan)
(Reporting by Harish Sridharan in Bengaluru and Yingzhi Yang in Beijing; Editing by Aditya Soni)