MBK makes another comeback victory

MBK Partners Chairman Kim Byung-ju

By Jhoo Dong-chan

MBK Partners has proven its competitiveness once again by coming from behind in the race to win the bidding for Lotte Card.

Forming an alliance with Woori Bank, the nation's largest private equity firm (PEF) was selected as the preferred bidder in negotiations with Lotte Group to acquire its credit card unit.

The PEF had been seemingly sidelined by competitor Hahn & Company at first, but Lotte Group changed its initial decision and chose MBK Partners as the preferred bidder Tuesday, citing the accusation made against CEO of Hahn & Company by KT labor union.

This isn't the first time for MBK Partners to achieve a comeback victory in mega M&A deals here.

In July 2012, the PEF lost the preferred bidder status to KTB Private Equity (PE) in the takeover of Coway, the nation's largest water purifier rental operator. However, MBK Partners was then named preferred bidder a month later after KTB PE failed to secure the necessary funding for the deal.

MBK Partners also wasn't the preferred bidder for ING Life Korea, currently Orange Life, in 2013.

Dutch ING Group had chosen KB Financial Group as the preferred bidder for its local life insurance unit, but canceled talks with the group when both sides failed to reach an agreement after six months.

ING then chose MBK, which had offered 1.8 trillion won ($1.62 billion), as the new preferred bidder, but in September sold the insurance unit to Shinhan Financial Group for 2.29 trillion won.

Market analysts said MBK's key strength comes from its mixture of experienced leadership from Chairman Kim Byung-ju and the company's deep pockets.

“I don't know how to put it, but MBK Partners' competitors have had some issues. You can say the firm has been quite lucky,” said an industry source familiar with the issue.

“Firms have often turned to MBK Partners after negotiations with their initial preferred bidders went south. Of course, MBK's vast experience in mega M&A deals might be another reason behind it.”

Hahn & Company was expected to acquire Lotte Card considering its bid of 1.8 trillion won. It wanted to acquire an 80 percent stake in the card firm, only to fail due to its ongoing legal battle engulfing union members of mobile carrier KT.

Under related laws, major shareholders must not be subject to punishment heavier than a monetary penalty for violating the Fair Trade Act or tax and special economic laws in the prior five years. Financial authorities only allow them to become a major shareholder if the offense is considered minor.

“Lotte Group needs to conclude the sale of its card unit by October,” said Meritz Securities researcher Eun Kyeong-wan.

“Hahn & Company's legal issue could linger for quite a while. The group doesn't want to risk it so chose MBK Partners as the preferred bidder to replace Hahn & Company.”