By Taiga Uranaka and Denny Thomas
TOKYO/HONG KONG (Reuters) - Meiji Yasuda Life Insurance Co has entered into exclusive talks to buy a 15 percent stake in Thai Life Insurance Co for around $700 million, people familiar with the matter told Reuters, as Japanese insurers step up their presence in Southeast Asia.
Meiji Yasuda, Japan's second-largest life insurer by premium income after Nippon Life Insurance Co, beat Sumitomo Life Insurance Co to enter final negotiations, in an auction that had attracted private equity firms Carlyle Group , KKR & Co and CVC Capital Partners, the people said.
A deal is expected as early as next week, one person familiar with the matter said.
If successful, Meiji Yasuda's purchase will make it the fourth financial services acquisition by a Japanese firm in Southeast Asia this year, bringing the year-to-date total value of Japanese M&A deals in the region to $6.6 billion.
Rising personal income in Southeast Asia is giving, for the first time in many cases, individuals and families the ability to afford insurance. That new demand has boosted stock prices and corporate valuations, culminating in a spate of M&A transactions.
To tap into that growth, Japanese insurers and banks have turned aggressive buyers of Southeast Asian financial services companies as they battle sluggish growth in their home market.
Meiji Yasuda officials were invited to Thailand recently for the discussions, while Sumitomo Life was told that the process has temporarily ended for them, a second source said.
A Meiji Yasuda spokesman declined comment, while Thai Life officials were unavailable for an immediate comment.
Unlisted Thai Life, the country's second-biggest life insurer, is selling a minority stake to help fund the next stage of its growth.
The stake sale is set to be Thailand's third insurance deal in the past year, with at least two more insurance deals said to be brewing in Southeast Asia.
Facing slow growth at home, Japan's financial services industry, as well as other sectors, have bought into Southeast Asian businesses to expand abroad, often taking minor stakes.
Japan's biggest lender Mitsubishi UFJ Financial Group (MUFG) is in advanced talks to buy a majority stake in Thailand's Bank of Ayudhya for over $4 billion.
In a related deal, Sumitomo Mitsui Financial Group agreed in May to acquire a $1.5 billion stake in Indonesia's BTPN .
Southeast Asia has emerged as a key battleground for global and regional insurers, with international companies attracted by the region's rapidly growing market.
Last year, Prudential Plc struck a $590 million deal to buy the insurance unit of Thailand's Thanachart Bank, and Hong Kong businessman Richard Li bought ING's operations in Hong Kong, Macau and Thailand.
All those deals have boosted insurance M&A in Southeast Asia to a record $13.1 billion last year, compared with a total of $3.9 billion in the previous four years, according to Thomson Reuters data.
Swiss Re Economic Research & Consulting forecasts that life insurance premiums in emerging Asia - a region comprising of seven countries, including China, India, Malaysian, Thailand - will grow at a compounded annual rate of 8.5 percent between 2011 and 2021 to $631 billion. By contrast, premiums in industrialized countries will expand 2.9 percent in the same period.
Meiji Yasuda's discussions for buying a minority stake comes just weeks after another Japanese company Dai-ichi Life Insurance Co Ltd agreed to purchase a 40 percent stake in Indonesia's Panin Life for $337 million.
Thai Life had 15.3 percent of the country's life insurance market with annualized premium equivalent of 6.2 billion baht ($202 million) as of the end of the second quarter of 2011, according to Thai Life Assurance Association data.
Thai Life is controlled by the Thailand's Chaiyawan family.
Barclays is advising Thai Life on the sale, according to a previous Reuters report.
(Reporting by Taiga Uranaka and Denny Thomas; Additional reporting by Khettiya Jittapong; Editing by Michael Flaherty and Ryan Woo)