By Yoon Ja-young
Staff Reporter
Hanwha Group won a six-year battle against the state-run Korea Deposit Insurance Corporation (KDIC) over the takeover of Korea Life Insurance.
The country's tenth largest conglomerate announced that the International Court of Arbitration (ICA) in New York ruled the stock transaction contract between Hanwha and KDIC on the life insurer was legitimate.
Korea Life Insurance, which had over 3.5 trillion won in public funds infused, was put for sale by the government. Hanwha acquired a 51 percent stake in the life insurer from KDIC for 823.6 billion won, or 2,275 won per share, around the end of 2002.
KDIC, however, argued that Hanwha used subterfuge to participate in the bid, making a behind-the-scenes deal with its consortium partner Macquarie Life, which allowed Hanwha to buy back shares purchased by the Australian insurer later. KDIC said this was a trick to meet the conditions for bid application ― an insurer had to be included in the consortium.
The prosecution brought the case to court, and the legal battle continued here until the Supreme Court ruled in favor of Hanwha in June 2006. Hanwha, which also has the right to exercise a call option to buy an additional 16 percent stake in the life insurer from KDIC, exercised the call option immediately after the court ruling.
KDIC, however, refused to accept Hanwha's call option and brought the case to international panel a month later, filing an application for arbitration with the ICA under the International Chamber of Commerce to nullify the sale of its stake in the life insurer to the conglomerate.
Following the ruling by the international panel, Hanwha Group started pressuring the KDIC, saying it should accept the conglomerate's call option, as all disputes on the transaction are over. The additional purchase of the shares would increase Hanwha's stake in the life insurer to 67 percent from the current 51 percent.
Hanwha would reap benefits from ownership of the second largest player in the industry with over 50 trillion won total assets, as it earned 358.6 billion won in net profits last year.
The group said it would prepare to list Korea Life Insurance as soon as possible since all hindrances to this bourse have been removed.
Analysts estimate the conglomerate could reap around 3 trillion won through the call option and the listing of shares on the bourse.
With plenty of money in its pockets, Hanwha Group would be better positioned to win the bidding for Daewoo Shipbuilding & Marine Engineering. Hanwha has shown strong determination to take over the shipbuilder, but analysts have pointed out that it is behind other competitors in terms of financing.
``The completion of legal problems will enable the life insurer to be listed, and the group's plan to finance the takeover of Daewoo Shipbuilding will be clearer,'' said Lee Sang-hoon, an analyst at Mirae Asset Securities.
Some predict that Hanwha will set up a financial holding company, which will link the life insurer with the group's non-life insurance, securities, and investment trust management subsidiaries.