By Yoon Ja-young
Staff Reporter
Hanwha Group and Hanjin Group are clashing over First Fire & Marine Insurance. Hanwha set on blocking the merger and acquisition bid on the insurer by Meritz Fire & Marine Insurance, the fifth largest non-life insurer in the country, owned by Hanjin Group Chairman Cho Yang-ho's younger brother.
Meritz sent a takeover proposal to Kim Young-hye, the largest shareholder of First Fire, asking if she will sell her 20.68 percent stake in the insurer. Kim is the elder sister of Hanwha Group Chairman Kim Seung-youn.
If Kim accepts the proposal, Meritz, which holds an 11.47 percent stake in First Fire, could become the largest shareholder of First Fire.
Hanwha Group announced that it would buy up shares of First Fire, to merge it with Hanwha Non-life Insurance. It added that Hanwha Engineering & Construction Corporation, Hanwha Galleria, Hanwha L&C Corporation, Hanwha Resort, and Hanwha TechM Corporation will join buying up shares in First Fire.
Meritz had regarded the scenario of Hanwha meddling as unlikely. Korea Life Insurance, Hanwha's major financial subsidiary, has had difficulty getting involved as Korea Deposit Insurance Corporation is its major shareholder. With Hanwha Non-life Insurance taking only a 3 percent market share, Hanwha didn't seem to be interested in the non-life insurance industry.
The acquisition would have enabled Meritz to pull up the market share from the current 10 percent to 13.5 percent to compete with Dongbu, Hyundai or LIG in the second-tier group of insurers with about a 15 percent market share each.
The insurer would wait for Kim's response to the proposal until April 24. If she turns it down, Meritz said it is prepared to mount a hostile takeover bid, buying up shares through a tender offer to pull up the stake to around 30 percent.
If Hanwha Group and Hanjin Group start buying up shares, First Fire is likely to continue the rally. The non-life insurer rose to the daily ceiling for five consecutive days. It closed at 17,950 won Tuesday, higher than the 15,525 won per share Meritz suggested to Kim Young-hye.
The higher share price means a greater burden on Meritz. ``If Meritz acquires First, it would leap forward as a second-tier insurer. If Hanwha acquires First, however, it would be a potential competitor for Meritz,'' said Han Seung-hee, an analyst at Woori Investment and Securities.
Some analysts estimate that Meritz may give up takeover bid, handing over its stake at an expensive price in a bloc deal.