Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
KB Financial beset by Prudential takeover
KB Financial Group Chairman Yoon Jong-kyoo, and the Prudential Life Insurance Company of Korea headquarters in Seoul / Korea Times file
By Park Jae-hyuk
By Park Jae-hyuk
KB Financial Group is facing an intensifying protest over its decision to acquire Prudential Life Insurance Company of Korea for 2.3 trillion won ($1.8 billion), according to industry officials, Thursday.
A council comprised of 10 representatives of unions of KB subsidiaries said in a statement Tuesday that it was considering taking legal action against KB Chairman Yoon Jong-kyoo and the board members for their alleged malpractice regarding the takeover.
“Amid the skeptical market outlook concerning the winner's curse in the long run, our group employees have been forced to bear an excessive financial burden,” the council said. “The management, which has caused a controversy over its expensive purchase and has promoted the deal as an achievement, seems to have started making preparations for the chairman's reappointment through the unreasonable M&A signed before the expiration of his term in November.”
The council cited KB's purchase price equivalent to 0.78 times Prudential's price-to-book ratio and the life insurer's declining number of contracts that dropped to 39,000 in 2018 from 110,000 in 2007 as reasons for the criticism.
Management dismissed the claim, saying the recent deal was irrelevant to the chairman's reappointment.
“We have continued to pursue our expansion in the non-banking sector for group growth,” a KB official said. “It was appropriate to pay 2.26 trillion won to acquire a superior life insurer having 2.9 trillion won in equity.”
Even before the banking group won the bid for the takeover of the U.S. insurance giant's Korean subsidiary, the KB union opposed the acquisition.
During the general shareholders meeting March 20, the leader of the KB Insurance union asked the chairman why the company was trying to acquire Prudential during an economic downturn.
The chairman answered at that time that the outlook for the insurance business was good enough.
On top of the KB union's protest, Prudential's financial planners also opposed the takeover.
According to industry sources, some of them recently held a rally to protest the acquisition, wearing black ribbons to indicate that “Prudential is dead.”
Prudential has been led by college graduate planners who are known for their pride in expertise.
“Having worked with the brand awareness of the global insurance company, the planners are feeling anxious about the fact that they will have to work for KB that has focused mainly on banking,” a source familiar with this issue said on condition of anonymity.
Promising job security to prevent the exodus of qualified financial planners, KB began preparing integration procedures to retake the leading financial group title from Shinhan Financial Group as soon as possible.
On Thursday, KB announced it posted a 729.5 billion won net profit in the first quarter, down 13.7 percent from a year earlier, due to the growing financial market volatility caused by the COVID-19 pandemic.
Its rival Shinhan will announce its earnings Friday.