M&As of Securities Firms
Nonghyup Financial Holding Company will acquire Woori Investment & Securities through a package deal.
It is the largest M&A contract in the history of the Korean securities industry, and is expected to accelerate the progress of the pending M&A deals in the sector. At present, approximately 10 local stock firms are predicted to disappear through M&As in 2014 alone, signaling a fundamental change in the landscape of the industry. The financial authorities have come up with a variety of restructuring plans to get rid of marginal securities firms, too.
Nonghyup Financial Holding Company and the Woori Financial Group held temporary board of directors meetings on April 11 to wrap up the conclusion of the package deal. The package includes Woori Investment & Securities, Woori Aviva Life Insurance, and Woori Financial Group Savings Bank. The contract price is approximately 1.05 trillion won (US$1.00 billion), discounted by approximately 10 percent through the due diligence.
A matchless giant with equity capital of about 4.4 trillion won (US$4.2 billion) will emerge once NH Nonghyup Securities and Woori Investment & Securities merge. The equity capital of the two companies was 882.2 billion won (US$848.7 million) and 3.467 trillion won (US$3.335 billion) as of the end of last year, respectively. The combined number of employees, 3,929, is second to none in Korea, with a record-setting 133 branches as well.
“The new company will be capable enough to penetrate overseas markets in earnest,” said an industry insider, adding, “The takeover of Woori Investment & Securities, which is highly competitive in the investment banking sector, will lead to a new giant unrivaled in size, which, in turn, will result in the acceleration of the reshaping of the industry.”
About 10 small stock firms are likely to be subject to business reorganization this year. For example, Apple Investment & Securities was shut down in March, after six years in business, due to its deteriorating profitability. Hanmag Securities, which suffered severe losses for the recent mistake in its derivatives transaction, is likely to be liquidated in the near future, too. Tong Yang Securities has been acquired recently by Yuanta Securities of Taiwan, and the disposal of Hyundai Securities is scheduled to start soon as well. Also for sale are IM Investment & Securities, eTrade Securities, Golden Bridge Securities, Leading Investment & Securities, LIG Investment & Securities and Heungkuk Securities.
“All of the companies except for Tong Yang and Woori have been in the red for years, which means they are not very attractive as M&A targets,” Kyobo Securities research analyst Park Hye-jin explained, continuing, “As such, they are likely to return their licenses this year to get out of the industry.”