KCGI tapped as preferred bidder to acquire Meritz Asset Management

Kang Sung-boo, CEO of KCGI, speaks during a press conference held at GLAD Hotel on Yeouido, Seoul, Feb. 20, 2020. Newsis

By Anna J. Park

Korea Corporate Governance Improvement Fund (KCGI) plans to acquire Meritz Asset Management, as it was selected recently as a preferred bidder by Meritz Financial Group and NH Investment & Securities, the manager for the sale.

The KCGI, an independent private equity firm based in Korea, is currently conducting due diligence prior to signing an official stock purchase agreement (SPA) with Meritz Financial Group, according to the investment banking sector this week.

Since the rumor first emerged in November that Meritz Asset would be put on the M&A market, the KCGI had been considered a potential buyer, as it has actively voiced its willingness to acquire the asset manager.

Considering Meritz Asset's net asset value is estimated at around 32 billion won ($24.7 million), it is expected to sell for around 50 billion won. Traditionally, an asset manager's selling price has been set at around 1.5 times or double its net asset value. However, some expect the possibility that Meritz Financial won't sell its full 100 percent stake so that it can hold onto a minority stake.

Meritz Asset's assets under management (AUM) stand at about 3 trillion won. The company posted an operating loss of 2.8 billion won during the first quarter of this year, its first loss logged in 12 years. Its profitability deteriorated this year, due partly to its former high-profile CEO John Lee's controversial resignation in June amid investigations by financial authorities over alleged irregularities.

Founded in May 2008, Meritz Asset built its unique presence by scouting Lee as CEO in 2014. He is a veteran fund manager who had been a managing director and senior portfolio manager at Lazard Asset Management, the world's largest independent investment bank. As Lee's long-held leadership ended unexpectedly earlier this year, Meritz Financial seems to have decided that it would be better to sell the asset manager than keep it to earn the market's trust once again.

The KCGI is an independent asset manager and private equity firm established in July 2018. It focuses on improving corporate value and governance systems of Korean corporations.