Japanese-affiliated J Trust, Overcoming 'Meoktwi' Controversy, to Sell JT Capital (Comprehensive)

JT Capital 100% Stake Scheduled for Sale That Day
Buyer is VI Financial Investment Established by Private Equity Fund
Controversy Over Embezzlement, Union Opposition, and Financial Services Commission Review Obstacles

[Asia Economy Reporter Song Seung-seop] The Japan-based financial group J Trust announced on the 14th that it will sell JT Capital. Although this proceeds as initially planned, most forecasts suggest that the sale of JT Savings Bank still has a long way to go. Controversies over 'eating and running' and issues with the Financial Services Commission's review are increasingly hindering progress.

According to the disclosure, J Trust is scheduled to transfer 100% of JT Capital's shares to VI Financial Investment on this day. Earlier last month, J Trust Group stated in a disclosure, "Due to the significant changes in the industrial structure caused by COVID-19 and the need for a comprehensive reassessment of profitability prospects," and added, "We judged that placing JT Capital and JT Savings Bank under new sponsors would contribute to sustainable growth and enhancement of corporate value."

The total transfer price is 116.5 billion KRW, and if the transfer contract is signed today, the actual transfer will be completed by June 15. The plan is to reach an agreement on 100% of JT Savings Bank's shares within three months thereafter.

VI Financial Investment is a financial company established by Banker Street Private Equity (PE), a Hong Kong-based private equity fund (PEF) operator. It was created by acquiring Hi Asset Management and Hi Investment & Futures. VI Financial Investment stated that it intends to complete the transfer contract as scheduled today. Since internal decision-making has been completed, there should be no setbacks. However, as of 3:30 PM today, no announcement related to the contract has been posted.

Until the day before, there were many concerns about whether the contract would proceed as planned. It was reported that J Trust Group had not received a firm confirmation from VI Financial Investment regarding the contract 2-3 days ago. The law firm managing the contract also stated, "Since this is a matter related to the client and the contract, we cannot confirm anything," which intensified the concerns.

Regulatory Review and 'Eating and Running' Controversy... A Mountain of Issues to Resolve

Despite concerns, the position is that the contract will proceed as scheduled, but many issues remain to be resolved. The financial industry analyzes that VI Financial Investment is worried about the Financial Services Commission's suitability review of major shareholders. Current law requires financial authorities' approval when selling savings banks. For VI Financial Investment, which intends to acquire both the capital and savings bank together, failing the review could result in the risk of only failing to acquire the savings bank.

Moreover, the labor union has raised the 'eating and running' controversy against J Trust. The argument is that the Japan-based financial company gains enormous profits through high-interest loans domestically and then withdraws from the market. In the case of private equity funds, there has been backlash because they often increase corporate value by restructuring and paying cash dividends after acquiring companies, then resell them.

The JT Savings Bank labor union held a press conference in front of the Financial Supervisory Service headquarters on the 11th, stating, "Businesses acquired by private equity funds are typically followed by restructuring and high-rate dividends," and argued, "If savings banks realize profits based on deposits from ordinary citizens, private equity funds should be disqualified from bidding for sales."

There are also criticisms that attempting to sell the savings bank and capital together at once is a 'trick.' There are concerns that VI Financial Investment will first purchase the capital, which does not require regulatory approval, and then indirectly acquire the savings bank through the capital company.

A JT Capital labor union official also warned at the press conference, calling it "a malicious loophole acquisition by private equity funds," and said, "If private equity funds acquire JT Capital, they will use JT Capital to raise funds without spending a single penny and pocket the profits."

Meanwhile, J Trust and VI Financial Investment signed a memorandum of understanding (MOU) last October to acquire JT Savings Bank but failed. At that time, they also failed to pass the Financial Services Commission's suitability review for major shareholders, and the MOU expired at the end of March.