Woori, IMM may form strategic ties for Prudential

The Korea Times

The Korea Times

Finance

Wed, November 29, 2023 | 21:31

Markets

Woori, IMM may form strategic ties for Prudential

Posted : 2020-03-16 15:16

Updated : 2020-03-16 18:25

The Prudential Life Insurance Company of Korea headquarters in Seoul; and Woori Financial Group Chairman Son Tae-seung / Korea Times file

By Park Jae-hyuk

A race for the takeover of Prudential Life Insurance Company of Korea is expected to become a three-way battle as Woori Financial Group is highly likely to support IMM Private Equity by offering acquisition financing, industry sources said Monday.

Acquisition financing is capital that is obtained for the purpose of buying another business.

"I heard Woori is in talks with IMM (about financing), and it is highly probable to take place," a source familiar with this issue said on condition of anonymity.

This can make the bid for the U.S. insurance giant's Korean unit into a three-way fight among KB Financial Group, MBK Partners and IMM.

Market observers have expected Woori to look for an indirect takeover, because financial authorities may not approve of its eligibility to become the insurer's largest shareholder.

According to sources, Woori will participate in the main bid on March 19 through acquisition financing, as it did when MBK bought Lotte Card last year.

It did not take part in the preliminary round for Prudential in January, although its Chairman Son Tae-seung said his company was considering acquiring the insurer.

According to financial observers, the group seems to be trying to avoid screening of eligibility by financial authorities.

"Nothing has yet to be decided but when it comes to M&A, our top priority is a securities company. So chances are that we will seek ways to offer acquisition financing instead of directly participating in the bidding for the insurance company," said a Woori official asking not to be named.

IMM, which holds a 5.96 percent stake in Woori, declined to comment on this issue.

However, the partnership between the homegrown private equity firm (PEF) and the financial holding company, which was punished for mis-selling of high-risk financial products, may cause a severe backlash from consumer groups or financial authorities.

Since it was fined and its chairman was sanctioned over the derivative-linked fund (DLF) fiasco that caused major investor losses, Woori has been regarded as a financially attractive yet politically awkward partner in the M&A market.

Some people say IMM can also be an uncomfortable partner for Woori.

In February, the Korea Finance Consumer Federation (KFCF) and four other consumer groups urged the Financial Services Commission to bar PEFs ― which the civic group defined as "vulture funds" interested only in profit ― from holding a controlling stake in the insurance company.

They alleged PEFs are highly probable to seek unfair competition and exaggerate their assets, because they would sell the insurance companies they bought within a short period of time.

Considering the financial authorities have put a top priority on consumer protection lately, there has been speculation that Woori would lean more toward a partnership with Taiwan's Fubon Financial, which holds a 4 percent stake in Woori.

Fubon is also among the bidders for Prudential.

"Benefits that are supposed to be paid to beneficiaries are coming from insurance companies' assets, and the assets are necessary for at-risk policyholders to continue with their lives. PEFs that pursue short-term profits should be banned from acquiring insurance companies," said Bae Hong, in charge of monitoring the insurance industry at the KFCF.

Regarding Woori's acquisition of Prudential, he said the civic groups will oppose it, unless the company takes measures to prevent the recurrence of a similar fiasco.

pjh@koreatimes.co.kr