After the failure of the 3rd sale process, 3 participants in the re-announced sale deadline on the 8th
Daily Partners and JC Flower, who participated in the 3rd preliminary bidding, also re-challenge
Up to 1 trillion KRW additional capital expansion needed... Still the biggest obstacle in the sale process
The sale of MG Insurance, which had failed three times due to bidders not meeting the requirements or no final bidders emerging, has entered a new phase following the reannouncement of the sale. Unlike previous bids where domestic and foreign private equity funds (PEFs) expressed interest but did not participate in the final bidding, this time Meritz Fire & Marine Insurance, one of the major non-life insurers, has expressed its intention to acquire the company.
According to financial sources on the 9th, Samjong KPMG, the lead manager for the sale of MG Insurance, closed the re-bidding process yesterday, and it is reported that Meritz Fire & Marine Insurance submitted a Letter of Intent (LOI) to acquire the company. Daily Partners and JC Flower, who participated in the preliminary bidding during the third sale attempt starting in March, also expressed acquisition intentions, meeting the conditions for a competitive bid.
The Korea Deposit Insurance Corporation (KDIC) stated, "Three companies participated in the reannouncement bidding for MG Insurance," adding, "We will review the bidders' ability to fulfill the contract and whether the bid prices meet the expected price to decide on the successful bidder."
KDIC had hoped to resolve the long-standing issue after barely meeting the competitive bidding requirements during the first half of the year’s sale attempt of MG Insurance. However, this attempt ultimately failed in July when both Daily Partners and JC Flower, who had submitted LOIs, did not submit final bid proposals.
After the third sale attempt failed, KDIC issued a re-bidding announcement within 12 days and received LOIs from three parties, including Meritz Fire & Marine Insurance and two PEFs. Despite widespread expectations that the fourth sale attempt would also struggle to produce results due to the failure in July, the outcome defied predictions.
In this re-bidding, in addition to the two PEFs that participated in the preliminary bidding, an additional buyer was able to participate. According to the National Contract Act, if only one qualified bidder or no bidders exist, the contract can be converted to a private contract, but a competitive bidding process was established.
Industry attention is focused on how much Meritz Fire & Marine Insurance, which newly submitted an LOI in addition to the two PEFs that participated in the previous bidding, has offered as the desired purchase price. KDIC allowed the acquirer to choose between stock sale (M&A) or contract transfer (P&A) methods to reduce the acquirer's burden.
The financial sector expects the sale price of MG Insurance to be in the range of 200 billion to 300 billion KRW. However, the additional capital increase, estimated to reach 800 billion to 1 trillion KRW after acquisition, remains the biggest hurdle in the sale process. Although KDIC is reportedly willing to provide around 400 billion KRW in funding, additional capital injection is inevitable to raise the solvency ratio (K-ICS) from 76.9% to the regulatory recommended level of 150%.
Some expect Meritz Fire & Marine Insurance’s participation in acquiring MG Insurance to open the way for the stagnant insurance M&A market. Lotte Insurance, which was once of interest to Woori Financial Group but did not participate in the final bidding, has shifted to a continuous sale system. Woori Financial Group is now considering whether to acquire a package of Dongyang Life Insurance and ABL Life Insurance. KDB Life Insurance, which has failed to achieve its sale objectives despite multiple attempts since 2014, is currently 95.7% owned by 'KDB Kansas Value Private Equity Fund (hereafter KDB PEF),' established by the Korea Development Bank in 2010. The Korea Development Bank is considering incorporating KDB Life as a subsidiary.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
