KDB scraps sales deal of KDB Life to JC Partners

KDB Life Insurance headquarters in central Seoul / Courtesy of KDB Life Insurance

By Anna J. Park

Korea Development Bank (KDB) has canceled the pre-arranged sale of its life insurance subsidiary to JC Partners which had been signed back in December 2020.

According to KDB on Wednesday, KDB Consus Value (KCV) PEF ― a private equity fund created jointly by KDB and Consus Asset Management ― notified JC Partners that it would cancel the stock purchase agreement (SPA) between the two parties.

KCV PEF and JC Partners agreed in late 2020 on the sale of a 92.73 percent stake in KDB Life for 200 billion won ($160 million). The grounds for the breaking of the deal lies in the state-owned bank's judgment that the private equity firm is now no longer able to pass the assessment process by the Financial Services Commission (FSC), which aims to evaluate whether JC Partners is qualified to take over KDB Life.

JC Partners applied for the assessment last June, but the FSC still hasn't given the private equity firm the green light, on the grounds that the company failed to follow through with its plan to secure the necessary capital for the takeover.

Now the chances of the private equity firm passing the test are near zero, as JC Partners is a major shareholder of MG Non-life Insurance, which the FSC designated as insolvent earlier this month. Being the major shareholder of an insolvent financial company is one of main disqualifying reasons for any takeover qualification assessment, according to the related law.

Now that the deal is off, KDB Life has to find a new buyer from scratch.

“KCV PEF will strive to raise the corporate value of KDB Life, and will look into the option of selling the company, considering market conditions,” the state-owned company said.

KDB acquired Kumho Life Insurance in 2009 as part of a restructuring process of Kumho Group, and injected more than 1 trillion won of public funds. Yet the life insurer's deteriorated condition only led to three failed attempts to sell the company. In late 2020, JC Partners was finally tapped to be the only preferred bidder to take over the company.

JC Partners responded to the FSC's assessment by filing an administrative lawsuit. The private equity firm said on April 18 that it had filed for an injunction to suspend the effects of the financial regulator's designation of MG Non-life Insurance as an insolvent company, as well as filing a lawsuit against the FSC.