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Rocky Road Ahead for Tongyang Securities
Hurdles to M&A
Rocky Road Ahead for Tongyang Securities
  • By matthew
  • January 20, 2014, 03:05
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Tongyang Securities' building in downtown Seoul.
Tongyang Securities' building in downtown Seoul.

 

The acquisition of Tongyang Securities kicked into high gear on January 16, but observers predict a rocky road ahead owing to uncertainties. Some raised concerns about the sales deal on account of KB Financial Group’s failure of the much-anticipated takeover of Tongyang’s financial arm, and their many unresolved issues. 

Tong Yang International and Tong Yang Leisure, the brokerage’s top two stakeholders, had a first meeting on January 16 with Deloitte Anjin LLC, which supervises the deal, to discuss the matter. 

The bidding process is scheduled to start sometime this month through an official announcement, but the prospect is not bright. Above all, its success is unclear. It is largely attributable to KB Financial Group’s decision to not participate after all. In fact, the firm’s participation was widely expected, since it was previously unable to buy Woori Investment & Securities.

The fact that other firms are offered for sale is not helping, either. For example, Hyundai Securities is on the market. KDB Daewoo Securities and LIG Investment & Securities may attract candidates for business sales, as well. 

Industry analysts are saying that there are some remaining unfavorable issues that should be dealt with, as well. About 600 employees of Tongyang Securities already left the company as of January 11 through voluntary retirement. Hence, a major restructuring of the business is unnecessary. However, the company should improve its messy organizational atmosphere. 

To add insult to injury, the number of lawsuits filed by thousands of individual investors over corporate bonds and the commercial paper of Tongyang Group’s subsidiaries sold by its financial arm exceeded 20,000 cases. The cases amount to 749.6 billion won (US$703 million) in total. Thus, future compensation for financial losses is likely to be a big burden on any potential buyer.

An industry source said, “The sale of Tongyang Securities won’t be easy, because lots of large companies are already on the market for sale.”