Jun Ji-hye, a reporter at the finance desk of The Korea Times, focuses primarily on economic policy and government agencies, mainly covering the Ministry of Finance and Economy, the Ministry of Budget and Planning, the National Tax Service and the Korea Customs Service. She previously covered financial authorities, including the Financial Services Commission and the Financial Supervisory Service, and earlier worked on the political, city and business desks, reporting on a wide range of issues.
Will Meritz abandon bid to acquire MG Non-Life?
MG Non-Life Insurance's headquarters in Seoul / Yonhap
By Jun Ji-hye
If takeover falls through, MG may face liquidation and 1.24 million policyholders may suffer principal loss
The sale of MG Non-Life Insurance is facing setbacks due to opposition from its labor union, raising the possibility that Meritz Fire & Marine Insurance, the preferred bidder, may withdraw the takeover bid, industry officials said Friday.
If Meritz Fire abandons the acquisition, MG Insurance could be at risk of bankruptcy, heightening concerns among its 1.24 million policyholders.
On Wednesday, the state-run Korea Deposit Insurance Corp. (KDIC), which oversees the sale of MG Insurance, filed for an injunction with a Seoul court against MG’s union to prevent obstruction of the sale process. The injunction aims to ensure Meritz Fire is given access for due diligence.
In 2022, the Financial Services Commission, the country’s financial regulator, designated MG Insurance as a financially distressed institution and tasked the KDIC with its sale.
After the fourth public auction failed in August last year, the KDIC switched to a private contract process and selected the non-life insurance arm of Meritz Financial Group as the preferred bidder on Dec. 9.
MG Insurance’s union has consistently opposed the sale to Meritz Fire, blocking its due diligence team from entering the headquarters. The union said that Meritz has been requesting data, including personal information, that it is not entitled to as a preferred bidder. The union is also demanding that the KDIC guarantee the full retention of all employees and revoke Meritz’s designation as the preferred bidder.
The union is opposing the sale of the company because it is being carried out through a purchase and assumption (P&A) process rather than a merger and acquisition. Under the P&A method, the acquirer can selectively take over only the desired assets and is not obligated to retain employees.
If the court grants the injunction, MG Insurance’s union will be required to cease obstructive actions and provide Meritz Fire with the necessary due diligence materials.
However, considering a decision typically takes around two months, and the union may file an objection, the dispute will likely drag on throughout the first half of the year.
Meritz Tower in Seoul / Courtesy of Meritz Fire & Marine Insurance
Kim Yong-beom, vice chairman and CEO of Meritz Financial Group, earlier said, "We will proceed with the acquisition if it increases earnings per share and aligns with shareholder interests. Otherwise, we will discontinue the process."
The comments were made in a conference call following the group's earnings announcement in November last year.
If Meritz Fire’s acquisition falls through, it is widely believed that MG Insurance will likely face liquidation or bankruptcy.
If this happens, MG Insurance’s 1.24 million policyholders may suffer principal losses. Even if an insurance company is liquidated, policyholders are guaranteed refunds of up to 50 million won ($35,000) under the Depositor Protection Act.
However, any amount exceeding this limit may be subject to loss. Additionally, all MG Insurance employees would lose their jobs.
“Separately from the injunction request, we are keeping communication channels open with MG Insurance’s union and will continue to push forward with the preferred bidder’s due diligence,” a KDIC official said. “Cooperating with the due diligence process to complete the sale is in the union's and employees' best interest. We will maintain the ongoing dialogue with the union.”