4-way Race for Prudential Life
KB Financial Group and three private equity funds (PEF) have participated in the preliminary tender for the financially-sound Prudential Life Insurance, which is estimated to be worth about two trillion won (US$1.72 billion).
Woori Financial Group has not joined the preliminary tender, but it can form a consortium later with one of the three PEFs to take part in the final tender, as it did in the previous tender for Lotte Card.
The three PEFs are MBK Partners, Hahn & Co., and IMM Private Equity. Goldman Sachs serves as the lead manager of the sale process. Up for sale is a 100 percent stake owned by the U.S.-based Prudential International Insurance Holdings (PIIH).
Woori Financial Group, which was mentioned as a potential bidder, has not participated in the preliminary bidding. Woori Bank is under scrutiny of the Financial Supervisory Service (FSS) for its improper selling of derivative-linked funds (DLF). Besides, the bank could face heavy losses from its investment in unredeemable Lime Asset Management’s hedge funds. However, the group can join forces with a private equity fund later. Woori Financial Group did not participate in a preliminary tender for Lotte Card in 2019 but formed a consortium with MBK in the final tender to acquire a majority stake in the card company. IMM PE, which owns 6 percent of Woori Bank, is considered to be one of the potential consortium candidates.
KB Financial Group is regarded as the strongest potential buyer of Prudential Life Insurance. The group’s chairman Yoon Jong-kyoo has expressed a strong will to strengthen its life insurance business. The group has been preparing for the acquisition of Prudential Life Insurance since 2019.
In particular, KB Financial Group has an advantage over its rivals in that it can afford to raise enough capital to take over the insurer. Given the 1.3 trillion won (US$1.12 billion) worth of its treasury stocks and 126 percent double leverage ratio, its financing capacity is close to 2.3 trillion won (US$1.98 billion). When its subsidiaries’ dividends and the issuance of additional capital securities are taken into account, it can raise up to a whopping four trillion won (US$ 3.44 billion).
Among the PEFs, MBK Partners is the most active player, which sold Orange Life Insurance (former ING Life Insurance) to Shinhan Financial Group and earned a trading margin of almost two trillion won (US$1.72 billion). Hahn & Company, which once took part in the previous bidding for Lotte Card, continues to have an eye on M&A for financial firms while IMM PE is also expanding its influence over the local financial industry.
Goldman Sachs plans to announce a short list of appropriate bidders among preliminary bidders next week. The final bidding is expected to take place within February 2020.
Meanwhile, the U.S.-based Prudential Financial Inc. has hired Goldman Sachs as a lead underwriter for the sale of the Korean operation unit and put Prudential Life up for sale in Korean market in 2019. Bidding price is an estimated two trillion won (US$1.72 billion). Prudential Life is ranked 7th in the industry with net profit of 146.4 billion won (US$126 million) as of the end of third quarter of 2019, and 11th with 20.81 trillion won (US$17.93 billion) in total assets. The ratio of Prudential Life Insurance’s risk-based capital (RBC), which serves as an indicator of insurers’ financial soundness, stands at the industry’s top of 515 percent.