Woori Financial Group to Acquire Daol Investment in February

Discussion on acquisition already completed
Final acquisition price likely in the 200 billion KRW range

[Asia Economy Reporter Kwangho Lee] Woori Financial Group will complete the merger and acquisition (M&A) process of Daol Investment next month. If everything goes smoothly, all five major domestic financial holding companies will own venture capital (VC) firms.

According to the investment banking (IB) industry on the 12th, Woori Financial Group has confirmed the acquisition of Daol Investment. Although a letter of intent (LOI) has not yet been signed nor has Woori been selected as the preferred negotiation partner, discussions related to the acquisition have already been completed. Negotiations over the final price are underway, with the goal of signing the main contract in February.

Previously, Daol Securities selected PwC Samil Accounting Corporation as the lead manager and entered the bidding process to sell Daol Investment. Competitive bids were submitted by Woori Financial Group, ShinYoung Securities, and Mirae Asset Group, among others. Woori Financial Group actively pursued the deal and ultimately secured the winning position.

From Daol Financial Group’s perspective, it was burdensome to proceed with the transaction while having multiple potential buyers. Quickly closing the deal to secure liquidity is urgent. Defending against the liquidity crisis of Daol Securities, which is heavily focused on real estate project financing (PF), is a pressing task.

Accordingly, they chose Woori Financial Group, which has the capability to close the deal, and are proceeding with the transaction. Considering Daol Investment’s stock price, the price for a 52% controlling stake is around 170 billion KRW. The final price will be set by adding a ‘control premium’ on top of this.

Initially, the industry speculated that Woori Financial Group would acquire Daol Investment for 300 billion KRW. This figure is possible if a control premium of 120 billion KRW is added to the 170 billion KRW equity price.

The issue is that a tug-of-war over the control premium is ongoing. According to the industry, the current control premium is lower than the level initially proposed by Daol.

It is also notable that the control premium differs significantly from those seen in previous VC M&As under financial holding companies. Shinhan Venture Investment (Shinhan Financial), Hi Investment Partners (DGB Financial), JB Investment (JB Financial), and BNK Venture Investment (BNK Financial) are representative examples. They recognized premiums of approximately 22%, 13%, 16%, and 58% based on net asset value, respectively.

An IB industry insider said, “If Daol had sufficient time and could present various options, they might have been able to maintain a certain level of control premium, but the situation did not allow for that.” He added, “Although price negotiations are ongoing, it is fair to say that their negotiating power has effectively disappeared.”

Once Woori Financial Group acquires Daol Investment, all four major domestic financial holding companies will own venture capital firms. Shinhan Financial Group (Shinhan Venture Investment), KB Financial Group (KB Investment), and Hana Financial Group (Hana Ventures) already have VCs.

Along with the control premium, future attention will focus on personnel adjustments. Compared to other VCs, Daol Investment has a relatively high proportion of senior staff. It is expected that efforts will be made to let some of them go. However, unlike general companies, changing personnel composition in VCs is not easy. If key investment officers, such as lead fund managers whose names are on funds, are dismissed, existing limited partners (LPs) may impose penalties. Whether Woori Financial Group alumni will move remains to be seen.