The ING Group signed a contract with MBK Partners, a local private equity fund, on August 26 to sell the Korean branch of ING Life Insurance. The price for sale is 1.8 trillion won (US$1.6 billion), 120 billion won (US$107 million) of which is subject to re-investment by the ING Group. “With the final contract being wrapped up, we’ll complete the deal before the end of this year through the government approval process,” said MBK Partners.
According to the contract, MBK can use the ING brand until 2018, and the ING Group is going to make a re-investment of 120 billion won (US$107 million) along with business consulting for the next year. Although MBK said that the ING Group highly rated the value of the Korean market, some experts are mentioning that the ING Group made many concessions because it was pinched for time.
Also, the contract includes a provision that the existing collective agreement will be maintained without restructuring to prevent opposition from the labor union of ING Life Insurance. The current top management structure is maintained until this year’s end, and then a professional manager system is brought in.
The last step is to win the approval of the financial authorities. The decision is expected to be made within two months, after MBK applies for the approval.
Some insiders are predicting that the government, which still has Lone Star trauma, will not be so generous this time. Of the total amount of 1.8 trillion won (US$1.6 billion), 800 billion won (US$716 million) has been borrowed from local banks, and the rest has been covered by foreign capital, including a Canadian pension fund.
The insurance industry is expecting that the final contract will have little impact on the market. “It is not a merger between insurers, and thus the impact is likely to be limited,” said an executive at a local insurance company, adding, “The Bogo Fund, which has to sell Tong Yang Securities, may find itself in an awkward position, because ING Life could be on the market again within a few years.”