By Kim Jae-kyoung, Park Hyong-ki
MBK Partners, a local private equity giant, seemingly wants to sell ING Life Insurance before the end of the year after holding onto the insurance company for five years, multiple sources said Tuesday.
Shinhan Financial Group has been in talks with the firm to acquire ING since April when it filed a public disclosure that it is considering the acquisition.
However, a Shinhan spokesman said it was not "near closing the deal." Weber Shandwick, a public relations agency representing MBK only said both sides were "negotiating," without giving more details.
A Shinhan official told The Korea Times earlier that the two sides were currently deadlocked over the value of ING ― the deal could be valued at 2 trillion won ($1.8 billion). Morgan Stanley is lead-managing the sale.
"Negotiations are underway, and price is the most critical issue," the official said, asking not to be named.
"But since MBK is a private equity firm and focuses on price, there is little flexibility in negotiations," he added.
MBK holds a 59.15 percent stake in the insurance company. ING went public in 2017, after MBK failed to unload it from its portfolio.
The firm has been seeking to sell ING since 2016. Potential Chinese buyers including China Life Insurance and China Taiping Insurance were supposedly interested at the time, but the deal fell through amid a diplomatic conflict between Korea and China over a U.S. antimissile battery deployment.
Private equity firms usually seek to sell their assets five years after acquisition to deliver maximum returns to their investors.
MBK bought ING Life Korea from ING Group for 1.8 trillion won in 2013. The firm is also apparently anxious to sell it before the deadline to use the ING brand expires this year. ING recently decided to change its name to Orange Life, pending approval from MBK.
Given there are no other interested buyers for ING, a person familiar with the talks said MBK is "hoping to keep negotiating" with Shinhan Financial.
Previously, KB Financial had shown interest in the insurer, but walked away due to the high asking price.
Another person with knowledge of the deal said MBK also wanted to unload ING as it had "too many" assets in its portfolio, which also need to be sold for its investors.
If Shinhan acquires ING's assets and debts, it would boost the value of the group, which has been seeking to increase the competitiveness of its nonbanking assets such as insurance and investment banking.
Analysts remain neutral about Shinhan Financial buying the shares in ING, even though the insurer is attractive given it has the industry's highest reserves measured by risk-based capital (RBC) ratio at 438 percent as of June. Regulators require insurance companies to maintain the RBC ratio at around 150 percent.
It could help the group diversify its business, but the question remains as to how it would finance the deal without affecting shareholder value.
"There is a chance Shinhan Financial could affect the value when raising capital to finance the acquisition," said Yoo Seung-chang, an analyst at KB Securities.
Shinhan Financial has cash and cash equivalents of over 18 trillion won as of the end of March, according to an audit filing. ING has total assets of 31.5 trillion won with debts of 27.9 trillion won as of June.
MBK Partners, a local private equity giant, seemingly wants to sell ING Life Insurance before the end of the year after holding onto the insurance company for five years, multiple sources said Tuesday.
Shinhan Financial Group has been in talks with the firm to acquire ING since April when it filed a public disclosure that it is considering the acquisition.
However, a Shinhan spokesman said it was not "near closing the deal." Weber Shandwick, a public relations agency representing MBK only said both sides were "negotiating," without giving more details.
A Shinhan official told The Korea Times earlier that the two sides were currently deadlocked over the value of ING ― the deal could be valued at 2 trillion won ($1.8 billion). Morgan Stanley is lead-managing the sale.
"Negotiations are underway, and price is the most critical issue," the official said, asking not to be named.
"But since MBK is a private equity firm and focuses on price, there is little flexibility in negotiations," he added.
MBK holds a 59.15 percent stake in the insurance company. ING went public in 2017, after MBK failed to unload it from its portfolio.
The firm has been seeking to sell ING since 2016. Potential Chinese buyers including China Life Insurance and China Taiping Insurance were supposedly interested at the time, but the deal fell through amid a diplomatic conflict between Korea and China over a U.S. antimissile battery deployment.
Private equity firms usually seek to sell their assets five years after acquisition to deliver maximum returns to their investors.
MBK bought ING Life Korea from ING Group for 1.8 trillion won in 2013. The firm is also apparently anxious to sell it before the deadline to use the ING brand expires this year. ING recently decided to change its name to Orange Life, pending approval from MBK.
Given there are no other interested buyers for ING, a person familiar with the talks said MBK is "hoping to keep negotiating" with Shinhan Financial.
Previously, KB Financial had shown interest in the insurer, but walked away due to the high asking price.
Another person with knowledge of the deal said MBK also wanted to unload ING as it had "too many" assets in its portfolio, which also need to be sold for its investors.
If Shinhan acquires ING's assets and debts, it would boost the value of the group, which has been seeking to increase the competitiveness of its nonbanking assets such as insurance and investment banking.
Analysts remain neutral about Shinhan Financial buying the shares in ING, even though the insurer is attractive given it has the industry's highest reserves measured by risk-based capital (RBC) ratio at 438 percent as of June. Regulators require insurance companies to maintain the RBC ratio at around 150 percent.
It could help the group diversify its business, but the question remains as to how it would finance the deal without affecting shareholder value.
"There is a chance Shinhan Financial could affect the value when raising capital to finance the acquisition," said Yoo Seung-chang, an analyst at KB Securities.
Shinhan Financial has cash and cash equivalents of over 18 trillion won as of the end of March, according to an audit filing. ING has total assets of 31.5 trillion won with debts of 27.9 trillion won as of June.
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