Competing for Top Spot
Shinhan Financial Group Co., a major South Korean financial holding company, is in the final stages of negotiations with MBK Partners to acquire a controlling stake in Orange Life, formerly known as ING Life Insurance, for 2.3 trillion won (US$2.07 billion). Orange Life is the group's first big acquisition in 11 years after it acquired Chohung Bank for 3.3 trillion won (US$2.96 billion) and LG Card for 6.7 trillion won (US$6.02 billion).
According to financial and investment banking (IB) industry sources on Sept. 3, Shinhan Financial is planning to sign a stock purchase agreement (SPA) with MBK Partners, a local private equity firm that acquired the Korean life insurance arm of the Dutch insurer ING Group in 2013, to take over a 59.15 percent stake in Orange Life for 2.29 trillion won (US$2.06 billion), including a premium for the management rights. The acquisition price comes to 47,400 won (US$42.59) per share of the life insurance firm.
The group will hold a special board meeting on the 5th for approval. The two companies have completed negotiations with regards to the price and are now in talks about specific conditions. When the deal is closed, Orange Life is getting 100 billion won (US$89.85 million) more considering year-end dividends.
MBK Partners initially expected nearly 3 trillion won (US$2.69 billion) for the sale but offered 2.4 trillion won (US$2.16 billion) after KB Financial Group, who was considered a potential buyer, lost interest in Orange Life. Shinhan Financial chairman Cho Young-byeong also said, “There is no overpayment.” The fact that the price of Orange Life shares recently decreased about 30 percent compared to earlier this year worked for Shinhan Financial.
When Shinhan Financial acquires Orange Life, which is the sixth largest firm in the life insurance industry, it is expected to compete with KB Financial for the top spot of the domestic financial industry. The net profit of Shinhan Financial stood at 1.8 trillion won (US$1.61 billion) in the first half of this year, falling short of KB Financial by 120 billion won (US$107.82 million).