[Asia Economy Reporter Jo Gang-wook] With the recent entry of the Taiwanese financial group Fubon into the Prudential Life Insurance acquisition battle, which had previously been a two-way contest between KB Financial Group and MBK Partners, there is speculation that a new competitive landscape may be forming. The financial sector views Fubon's late decision to participate after initially withdrawing from due diligence as a potential significant variable.
According to industry sources on the 17th, Fubon Group has recently formed an advisory team including global investment bank UBS and accounting firm Samil PwC and has begun due diligence on Prudential Life Insurance. Initially, Fubon Group participated in the preliminary bidding but reportedly gave up on due diligence. This was interpreted as a judgment that their chances were slim due to the prominent two-way contest between KB Financial and MBK Partners. However, their late participation in due diligence has raised speculation that they could become a dark horse. The sale manager, Goldman Sachs, stated that since Fubon was a candidate who participated in the preliminary bidding, there is no problem with conducting due diligence. As a result, five parties will participate in the main bidding for Prudential Life Insurance scheduled for the 19th of next month: strategic investors (SI) KB Financial and Fubon Group, and financial investors (FI) MBK Partners, IMM Private Equity, and Hahn & Company.
Fubon Group entered the domestic market in 2015 by acquiring a 48% stake in Fubon Hyundai Life Insurance (formerly Hyundai Life Insurance). Subsequently, in 2018, through a capital increase of 300 billion KRW, Fubon Life, a subsidiary of Fubon Group, became the largest shareholder (62%). At that time, Hyundai Mobis, the second-largest shareholder, did not participate in the capital increase, and Fubon Life acquired all the forfeited shares. Since then, Fubon Hyundai Life has strengthened its retirement pension business by leveraging its relationship with the former largest shareholder, Hyundai Motor Group. If Fubon succeeds in acquiring Prudential Life Insurance, it could quickly establish itself as a leading player in the domestic market from a small to mid-sized insurer.
MBK Partners is known to have offered the highest price in the preliminary bidding that closed last month. This is why MBK Partners was considered the leading candidate in the public bidding for Prudential Life Insurance. The issue lies in MBK Partners' two-year "non-compete" agreement signed when it sold Orange Life (formerly ING Life) to Shinhan Financial Group in September 2018. This means they can enter the insurance business, a similar industry, only from September this year, implying that the transaction closing date must be after September. Considering that it usually takes about two months from the main bidding to contract signing, the process will be delayed by an additional three to four months. Analysts suggest that MBK Partners' aggressive acquisition intent compared to other candidates is due to this reason.
KB Financial's acquisition intent, with a focus on management, is also notable. They have formed an advisory team including JP Morgan and Deloitte Anjin and established a task force team (TFT). This TFT will be responsible for the post-merger integration (PMI) process with KB Life if the acquisition succeeds. The problem is the price. Since MBK Partners has shown aggressive intent and Fubon Group has also decided to participate late, price competition is expected to intensify.
KB Financial Chairman Yoon Jong-kyu has repeatedly expressed that acquiring a life insurance company is a top priority but has shown caution against "overpaying." KB Financial also stated in a recent conference call that it will approach the Prudential Life Insurance acquisition cautiously. Previously, it gave up on acquiring the former ING Life due to controversy over the high price.
However, there is skepticism about whether Fubon Group will complete the bidding. Although Fubon Group has consistently appeared in the domestic financial M&A market, there have been several cases where it did not follow through to the end. Last year, it participated in preliminary bids and conducted due diligence for Lotte Card and Lotte Non-Life Insurance but did not participate in the main bidding.
A financial industry insider said, "So far, the two-way contest between KB Financial, which has advantages in non-price factors such as major shareholder suitability screening, and MBK Partners, which has financial strength, is the most likely scenario," but added, "Fubon Group's late participation in due diligence can be interpreted as showing acquisition intent, and there is also a possibility of forming a coalition through a consortium."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
