By Park Hyong-ki
Shinhan Financial Group is scheduled to hold a board meeting Wednesday in which its members are expected to finalize the decision on whether to acquire Orange Life, according to the listed financial holding company.
A group spokesman said the group will hold the meeting Wednesday morning given that its outside board members, including college professors, have to get back to their jobs afterwards.
The board's agenda includes discussing the group's ongoing negotiations to take over Orange Life, formerly known as ING Life Insurance, from MBK Partners, a local private equity giant, the group said.
Board members include Park Cheul, a former vice governor of the Bank of Korea, Philippe Avril, a general manager of BNP Paribas Tokyo branch, and Prof. Lee Man-woo of Korea University Business School, according to the group's semiannual financial report.
Even if the board gives its blessing to Shinhan on the deal, this does not mean Shinhan and MBK will immediately sign a takeover contract, said a source familiar with the situation.
Shinhan will still have to deal with open-ended issues such as how it will acquire the rest of Orange Life shares not owned by MBK. Shinhan is currently negotiating to acquire MBK's 59 percent stake in Orange, a listed life insurer. Morgan Stanley is managing the sale on behalf of MBK.
Furthermore, it would have to conduct its due diligence of the life insurance company when the group decides to take the next phase of the acquisition process.
The deal could fall apart when a potential buyer discovers an anomaly while it thoroughly checks the books of a seller.
Thus, it would take more than three months for both parties to finally sit down and sign the deal, the source noted.
The market is expecting the price to take over Orange could reach more than 2 trillion won ($1.8 billion), including the value of management premium.
Analysts say Shinhan is financially fit and healthy to acquire the life insurance company without having to issue new shares to raise capital for it.
Also, the potential deal would not affect its double leverage ratio, measuring whether financial holding companies are highly leveraged with regard to their equity ownership and investment in subsidiaries.
Shinhan's ratio stands at around 122 percent, below the regulatory limit of 130 percent. The ratio is determined by dividing the parent firm's equity investment in the subsidiary by its total equity.
"The acquisition would boost the value of Shinhan Financial Group," said Baek Doo-san, an analyst at Korea Investment & Securities.
But it could slow other Shinhan subsidiaries to find opportunities as the group zeroes in on this deal, the analyst noted.
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| Shinhan Financial Group headquarters in Seoul. Korea Times file |
A group spokesman said the group will hold the meeting Wednesday morning given that its outside board members, including college professors, have to get back to their jobs afterwards.
The board's agenda includes discussing the group's ongoing negotiations to take over Orange Life, formerly known as ING Life Insurance, from MBK Partners, a local private equity giant, the group said.
Board members include Park Cheul, a former vice governor of the Bank of Korea, Philippe Avril, a general manager of BNP Paribas Tokyo branch, and Prof. Lee Man-woo of Korea University Business School, according to the group's semiannual financial report.
Even if the board gives its blessing to Shinhan on the deal, this does not mean Shinhan and MBK will immediately sign a takeover contract, said a source familiar with the situation.
Shinhan will still have to deal with open-ended issues such as how it will acquire the rest of Orange Life shares not owned by MBK. Shinhan is currently negotiating to acquire MBK's 59 percent stake in Orange, a listed life insurer. Morgan Stanley is managing the sale on behalf of MBK.
Furthermore, it would have to conduct its due diligence of the life insurance company when the group decides to take the next phase of the acquisition process.
The deal could fall apart when a potential buyer discovers an anomaly while it thoroughly checks the books of a seller.
Thus, it would take more than three months for both parties to finally sit down and sign the deal, the source noted.
The market is expecting the price to take over Orange could reach more than 2 trillion won ($1.8 billion), including the value of management premium.
Analysts say Shinhan is financially fit and healthy to acquire the life insurance company without having to issue new shares to raise capital for it.
Also, the potential deal would not affect its double leverage ratio, measuring whether financial holding companies are highly leveraged with regard to their equity ownership and investment in subsidiaries.
Shinhan's ratio stands at around 122 percent, below the regulatory limit of 130 percent. The ratio is determined by dividing the parent firm's equity investment in the subsidiary by its total equity.
"The acquisition would boost the value of Shinhan Financial Group," said Baek Doo-san, an analyst at Korea Investment & Securities.
But it could slow other Shinhan subsidiaries to find opportunities as the group zeroes in on this deal, the analyst noted.
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