Mirae Asset Financial Group Chairman Park Hyun-joo seeks to acquire SK Securities. During a New Year's meeting with financial industry leaders, Park said he is considering plans to increase its capital to 8 trillion won (US$7.13 billion). So, some say that the acquisition of SK securities will signal the capital expansion. When Mirae Asset takes over SK Securities, the financial group’s equity capital will exceed 7 trillion won (US$6.24 billion).
According to investment banking (IB) industry sources on May 29, domestic strategic investors, including Mirae Asset Daewoo and JB Financial Group, showed their intention to acquire SK Securities. Taiwanese private equity fund (PEF) and domestic PEF also offered a deal to SK Securities, which have had difficulties in finding a new owner.
An official from the IB industry said, “Chairman Park visited SK Group twice to meet SK CEO and show his intention to acquire SK Securities, and JB Financial Group, which aims to become a total financial holding company consisting of bank and securities and insurance companies, also shows considerable interest in SK Securities.” Another IB industry official said, “Mirae Asset Daewoo announced its goal to expand its capital to 8 trillion won (US$7.13 billion), but its current capital amounts to some 6 trillion won (US$5.35 billion). This is why the company is so interested in taking over SK Securities.” Mirae Asset Securities and Daewoo Securities had the simple sum capital of 7.86 trillion won (US$7 billion) – 3.46 trillion won (US$3.09 billion) from Mirae Asset Securities and 4.4 trillion won (US$3.92 billion) from Daewoo Securities. However, the capital of Mirae Asset Daewoo amounted to 6.66 trillion won (US$5.93 billion) right after the merger. This was largely due to the fact that Mirae Asset Group acquired a 43 percent stake in KDB Daewoo Securities for 2.4 trillion won (US$2.14 billion) but its stake turned into treasury stocks which didn’t count in accounting.
The IB industry says that it is a different deal from other securities firms up for sale considering the fact that SK Group can obtain the control of SK Securities when it buys an additional 10 percent stake of the company, while others needs to take over more than a 50 percent stake. An official from the IB industry said, “With an additional 10 percent stake, the group will be able to increase its capital by 400 billion won (US$356.35 million). It is the same as the third party allocation.”
In addition, SK Securities is attractive since it is a listed company. The company can set its merger ratio according to market prices so it doesn’t have to reevaluate its enterprise value unlike unlisted companies. SK Securities had a capital of 411.2 billion won (US$366.33 million) and market capitalization of 425.7 billion won (US$379.24 million) as of the 29th. Considering more than 50 percent of its premium for the management rights with the market equity value of 42.5 billion won (US$37.86 million), the estimated price of SK Securities is as low as 64 billion won (US$57.02 million). JB Financial Group is also considering the acquisition of SK Securities as the company has been continuously seeking to acquire securities firms after it failed to buy LIG Investment & Securities, the current CAPE Investment & Securities, in 2015.
However, SK Group prefers a PEF to a SI as its new owner. When a PEF acquires SK Securities, it is highly likely to keep the current brand name and be more flexible in group IB transactions. Currently, SK Securities still pays a brand royalty to SK Group. Given the characteristics of PEFs, SK Group can also reacquire the company in the future. This is why SK Group prefers a PEF which has a proven ability for financing and credibility with the group.