Yunfeng’s MassMutual Asia buy puts MPFA chairman in conflict

21 August 2017   Category: News, Asia, China, Global, Hong Kong, USA, Europe, United Kingdom, Canada   By Liz Mak

David Wong Yau Kar, chairman of the Hong Kong Mandatory Provident Fund Authority (MPFA) and a board member of the Jack Ma-backed Yunfeng Financial Group (Yunfeng) since 2012, is facing a conflict of interest in his capacity as a regulator as Yunfeng buys into MassMutual Asia – one of the 18 approved trustees for the Hong Kong mandatory pension scheme.

Mr. Wong has abstained from voting on the deal at Yunfeng, a move that the company says is to avoid the perception of conflict of interest.

But he has not excused himself from the management board at the MPFA that provides "strategic guidance and policy direction" to the authority. This is while the MPFA stresses that Mr. Wong is a non-executive director and the handling of regulatory approval will be performed by the authority's executive directors, the authority says in response to questions from Asia Asset Management (AAM).

Yunfeng said on August 17 that it is leading a consortium comprising China investors and Singapore sovereign wealth fund GIC to acquire MassMutual Asia from Massachusetts Mutual Life Company (MassMutual) for US$1.68 billion in a shares and cash deal.

Under the terms of the transaction, MassMutual will receive $1.01 billion in cash, and 800 million Yunfeng shares at HK$6.50 ($0.83) each that would be worth approximately $668 million. The shares will represent 24.8% of Yunfeng’s expanded capital upon completion of the deal.

Meanwhile, Yunfeng will have a 60% stake in MassMutual Asia, with the other members of the consortium together holding the remaining 40%. They are: Ant Financial, which will hold 5%; Sina, 5%; Giant Interactive, 2.8%; GIC Private Limited, 7.5%; Meyu International, 9.8%; Harvest Billion International Limited, 4.9%; and Sheen Light Development Limited, 5%.

The deal will require the consent of Yunfeng’s independent shareholders—the group from which Mr. Wong has excused himself for the deal. Yunfeng and the MPFA did not respond when asked whether he owns shares in the company.

On the regulatory side, in addition to the MPFA, the transaction will need approvals from the Hong Kong Insurance Authority, Securities and Futures Commission, and the Monetary Authority of Macau.

According to Yunfeng, Mr. Wong is abstaining from being involved in the deal on the company’s board due to his role as a regulator, and that this was disclosed in the announcement.

“It is because Dr. Wong is the Chairman of the MPFA and that the obtaining of the prior written consent of the MPFA to the proposed change of the substantial shareholders of [MassMutual Trustees] in its capacity as the approved trustee of the MASS Mandatory Provident Fund Scheme and the written approval of the MPFA to the proposed revised offering documents of the MASS Mandatory Provident Fund Scheme is one of the conditions,” Yunfeng says in a statement to AAM.

“In order to avoid a perception of conflict of interest, Dr. Wong has volunteered to abstain from voting on the relevant board resolutions of the company to approve the deal. For the same reason, Dr. Wong has not been included in the independent board committee of the [Yunfeng],” it adds.

MassMutual Trustees is the subsidiary of MassMutual Asia that provides the MPF services.

MPFA spokeswoman Helen Mok tells AAM that Mr. Wong remains involved in the authority’s management board, which provides the MPFA's strategy and policy inputs. The authority's executive directors will be responsible for approving the shareholder change at MassMutual Asia.

“The Management Board of the MPFA determines key corporate strategies and policies. MPFA executives are responsible for the management of day-to-day operations of the authority. The MPFA handles all applications for approval of change of substantial shareholders of trustees in accordance with the law,” Ms. Mok says.

Mr. Wong did not respond to AAM’s requests for comment.

The total net asset value under the Hong Kong mandatory pension scheme was worth HK$745.73 billion as at end-June.