Interest in the Year's First Trillion-Won Large Asset Sale
KB Financial and Woori Financial Set for Two-Way Battle
Low Interest in KDB Life Insurance Sale
[Asia Economy Reporter Jo Gang-wook] Market interest is growing in the first trillion-won scale major deal of the year: the Prudential Life Insurance acquisition battle. While it is widely expected that KB Financial Group and Woori Financial Group will compete, the possibility of large private equity funds (PEFs) joining the fray is also being anticipated. On the other hand, as the heat of the Prudential Life Insurance acquisition battle intensifies, the sighs of KDB Industrial Bank, which has put KDB Life Insurance up for sale, are deepening.
According to the investment banking (IB) industry on the 3rd, Goldman Sachs, the lead manager for the sale of Prudential Life Insurance, recently sent investment memorandums (IM) to major candidates and announced that a preliminary bidding will be held on the 20th. The sale target is 100% of the shares of Korea Prudential Life Insurance held by the US-based Prudential Financing.
Prudential Life Insurance is evaluated as a 'prime asset' with both profitability and soundness. As of the end of June, its assets stood at 20.1938 trillion KRW, ranking 11th in the industry, but its net income for the first half of the year was 105 billion KRW, ranking 5th. In particular, its Risk-Based Capital (RBC) ratio, which indicates the asset soundness of an insurance company, is 505.1%, ranking first. This is outstanding compared to the financial authorities' recommended level (150%) and the industry average (296.1%).
KB Financial Group is considered a representative interested party in Prudential Life Insurance. Especially since it suffered a setback in the 2018 ING Life (now Orange Life) acquisition battle, its determination is strong. At that time, Shinhan Financial Group acquired ING Life, surpassing KB Financial Group to become the number one financial holding company by assets.
Yoon Jong-kyu, chairman of KB Financial Group, expressed his intention to expand business areas through mergers and acquisitions (M&A) this year. In his New Year's address, Chairman Yoon said, "We must enhance the completeness of the group portfolio and secure new growth momentum through business expansion," adding, "To this end, we will keep various M&A possibilities open and review them carefully, but when opportunities arise, we will proceed boldly and swiftly."
Woori Financial Group is also likely to take an aggressive stance on the acquisition. Re-established in January last year, Woori Financial Group has a bank ratio of over 90%, making the expansion of its non-bank business portfolio urgent. Although it acquired asset management companies (Dongyang and ABL) and a real estate trust company (International Asset Trust) last year, it does not have an insurance company. Sohn Tae-seung, chairman of Woori Financial Group, also stated in his New Year's address, "Entering the second year of the group system, we plan to continuously pursue strategic M&A."
The possibility of participation by large private equity funds (PEFs) is also high. MBK Partners, for example, made a profit by selling its 59.15% stake in ING Life, which it acquired in 2013, to Shinhan Financial Group for 2.2989 trillion KRW five years later.
The Korea Development Bank (KDB) headquarters in Yeouido, Seoul, showed a quiet scene on the 20th, which General Motors (GM) headquarters referred to as the 'deadline' for Korea GM's court receivership. KDB is the second-largest shareholder, holding 17% of Korea GM's shares. However, out of the 10 board members, only 3 represent KDB, making it difficult to prevent GM headquarters from pushing forward with court receivership. Lee Dong-geol, chairman of KDB, stated that if GM headquarters unilaterally places Korea GM under court receivership, they will take legal actions such as lawsuits. Photo by Moon Honam munonam@
On the other hand, the sale of KDB Life Insurance, strongly promoted by Lee Dong-geol, chairman of KDB Industrial Bank, has hit a snag. KDB Industrial Bank attempted to sell KDB Life Insurance twice in 2014 and once in 2016 but failed each time. Despite putting all efforts into the sale last year, even the initial goal of selecting a preferred bidder was not achieved. Moreover, if the sale of KDB Life Insurance fails by next month, the bank may have to consider converting into a holding company under the Financial Holding Companies Act and the Fair Trade Act. The cause is understood to be a large gap between the expected sale price and the market valuation. While KDB Industrial Bank expects a sale price of about 600 billion KRW considering the investment amount, private equity funds participating in the preliminary bidding reportedly offered around 200 billion KRW. With other competing assets such as Prudential Life Insurance flooding the market, relative market interest seems to have declined.
An IB industry official said, "Since the heads of financial holding companies have already solidified their intentions regarding mergers and acquisitions, interest in Prudential Life Insurance, considered a prime asset, is growing even more," adding, "Not only The-K Non-Life Insurance, which is already on the market, but also potential assets such as Dongyang Life, ABL Life, and MG Non-Life Insurance are waiting their turn this year, making it difficult for the KDB Life Insurance sale to succeed."
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