Gluttony of Chinese Money
As the deadline for the letter of intent (LOI) application to buy ING Life Insurance, the biggest item for sale in the domestic M&A market in the first half of the year, is coming up to the end of this month, market experts think that Chinese capital will eventually take over the company and expand its influence in the Korean insurance market. This is large due to the fact that the asking price of ING Life Insurance has recently surpassed 3 trillion won (US$2.57 billion) as the “hope” of MBK Partners, which owns the company, and Morgan Stanley, which leads the sale procedure, is actively reflected. However, the price is too much for domestic financial firms to willingly join the bid.
On the other hand, China’s Anbang Insurance and Ping An Group, which seek to push into the domestic insurance market with the capital power, also took over businesses in global M&A markets last month. There is an overriding prediction in the market that the two companies will play a crucial role in the bidding battle for ING Life Insurance again.
According to industry sources on May 9, Morgan Stanley, a lead manager for the sale of ING Life Korea, distributed information memorandums to about 10 potential buyers at home and abroad last month. Before sending the guide, it personally visited them and started marketing. The potential candidates include Korean firms, such as KB Financial Group, Hanwha Life Insurance, Kyobo Life Insurance and NongHyup Life Insurance, and Chinese firms, like Anbang, Ping An and Fuxing.
MBK Partners, Korea's largest private equity firm, acquired a 100 percent stake in ING Life Insurance from the Netherlands-based ING Group for 1.8 trillion won (US$1.54 billion) at the end of 2013. Currently, ING Life Insurance is the nation’s fifth largest life insurer with the total assets of 29.6 trillion won (US$25.32 billion). The company posted 4.5 trillion won (US$3.85 billion) in sales and 304.8 billion won (US$260.74 million) last year, up 22 percent and 36.3 percent from the previous year, respectively. Despite the slowdown in the domestic life insurance market, it had shown a remarkable growth. Its RBC rate also stands at 325 percent, ranking second in the top 10 list.
This is why Hanwha and Kyobo, which have a huge gap with Samsung, NH NongHyup, which needs to expand sales divisions, and KB Financial Group, which is weak in the insurance sector, are mentioned as potential buyers as they can rapidly grow with the M&A. However, domestic financial businesses are now stuck with the slow growth in the domestic market and the burden of capital expansion caused by the introduction of new international accounting standards.
On the other hand, Chinese capital has been wielding strong influence over the global M&A market until recently. When Anbang Insurance took over Allianz Life Insurance Korea and Allianz Global Investors Korea earlier last month, Ping An Group immediately announced that it would acquire popular baby product company Tommee Tippee from UK private equity group at 135 million for 135 million Pounds (US$194.75 million or 227.66 billion won). Both Ping An Group and Anbang Insurance, which rank second and third in the Chinese insurance market, are strong candidates to purchase ING Life Insurance. In particular, Anbang Insurance has made the aggressive movement in the domestic M&A market, attracting the most attention in the takeover battle for ING Life Insurance.