'MG Sonbo' Sale Main Bids on 19th... Government Support Scale Is a Variable

Interest in Whether Daily Partners and JC Flower Who Submitted LOI Will Submit Proposals
Estimated Minimum 800 Billion KRW for Normalization Costs After Acquisition... Additional Funding Burden

The final bid for the sale of MG Insurance, which is undergoing the sale process after three attempts, will take place on the 19th. Attention is focused on whether Daily Partners, a domestic private equity fund (PEF), and JC Flower, a US-based PEF, which submitted letters of intent (LOI) in the preliminary bidding, will ultimately participate in the final bidding and meet the competitive bidding requirements.

According to the insurance industry, the Korea Deposit Insurance Corporation plans to receive proposals from investors interested in acquiring MG Insurance by 3 p.m. on the same day. Once the proposal submission is completed, the KDIC intends to quickly decide on the new owner of MG Insurance within a week.

If either Daily Partners or JC Flower, who submitted letters of intent in the preliminary bidding, fails to submit a purchase proposal on the day, the sale process will be canceled due to failure to meet the competitive bidding requirements. The expected sale price of MG Insurance is around 200 to 300 billion KRW, but the costs for normalization after acquisition are expected to be considerable.

There is also interest in the amount of government support that investors will request based on the results of the final bidding. This sale is proceeding not through a typical merger and acquisition (M&A) method but through an asset and liability transfer (P&A) method. This method separates high-quality assets and liabilities for acquisition, which is initially advantageous to the new acquirer.

However, MG Insurance, designated as a financially distressed institution, had a K-ICS ratio of 77% as of the end of last year, and to meet the financial authorities' recommended level of 150%, the new acquirer must raise about 800 billion KRW in capital. This means that management normalization without government financial support is difficult. It is known that the KDIC plans to provide 400 to 500 billion KRW in support once a preferred bidder is selected.

An insurance industry official analyzed, "Whether this sale succeeds will depend on which bidder requests relatively less public funds," adding, "It will also be interesting to see how much the gap between the bidder and the government over the scale of government support can be narrowed."