Saemaeul Geumgo Embracing Hyosung Capital, Considering Acquisition of JT Capital

[Asia Economy Reporter Lim Jeong-su] MG Saemaeul Geumgo, which is in the final stages of acquiring Hyosung Capital, is considering an additional acquisition of JT Capital. This strategy is interpreted as an effort to rapidly increase the capital affiliate’s operating assets to the 3 trillion KRW level to create economies of scale.

According to the investment banking (IB) industry on the 24th, Saemaeul Geumgo is reviewing the acquisition of JT Capital. An industry insider stated, "During the fundraising process for the Hyosung Capital acquisition, Saemaeul Geumgo explained plans to expand asset size through an additional acquisition of JT Capital."

JT Capital is currently 100% owned by the Japanese J Trust. The JT Financial Group owns JT Capital along with JT Savings Bank and JT Chinhae Savings Bank domestically. It operates various financial businesses such as banking and cards in Japan, Indonesia, Mongolia, and other countries. J Trust is known to hold most of the shares of its domestic and overseas affiliates and acts as the group’s holding company.

J Trust recently selected VI Financial Investment as the preferred bidder for acquiring JT Savings Bank but has not yet actively started the sale process for JT Capital. Related industry sources expect JT Capital to be put up for sale soon, and it is understood that both Saemaeul Geumgo and J Trust have been negotiating the sale and acquisition of JT Capital.

An industry insider said, "Saemaeul Geumgo mentioned a concrete funding plan to acquire JT Capital by raising 70 billion KRW through Hyosung Capital’s paid-in capital increase and securing new funds," adding, "They emphasized that combining Hyosung Capital, which has a high proportion of corporate assets such as project financing (PF), with JT Capital, which has a high proportion of household assets, would create significant synergy."

The acquisition of Hyosung Capital by Saemaeul Geumgo is reportedly in its final stage. Saemaeul Geumgo is pursuing the acquisition by participating as a limited partner (LP) in a project fund (PEF) raised by the private equity (PE) management firm ST Leaders. This fund is composed of 100 billion KRW in senior investment, 150 billion KRW in subordinated investment, and 1 billion KRW contributed by ST Leaders as the general partner (GP).

ST Leaders will use the raised funds to acquire 100 billion KRW worth of redeemable convertible preferred shares (RCPS) and 151 billion KRW worth of common shares in a special purpose company (SPC) that will acquire shares of Hyosung Capital. The SPC plans to purchase existing shares of Hyosung Capital for 380 billion KRW by combining the fund’s 251 billion KRW contribution with 200 billion KRW in acquisition financing, and will additionally invest 70 billion KRW in Hyosung Capital’s paid-in capital increase.

Saemaeul Geumgo invested 150 billion KRW as a subordinated investor in the project fund raised by ST Leaders. At the same time, it secured a preemptive purchase right on the shares of Hyosung Capital held by the SPC. It also promised efforts to support liquidity, including subscribing to corporate bonds issued by Hyosung Capital.

If Saemaeul Geumgo acquires JT Capital as well, it will be able to increase the asset size of its affiliated capital companies to 3 trillion KRW at once. After being incorporated into Saemaeul Geumgo, the credit rating of the capital companies is expected to improve, reducing funding costs and enhancing profitability. An IB industry insider said, "The deal can only be completed if the conditions, including price, align during negotiations between both parties."