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| Shinhan Financial Group Chairman Cho Yong-Byoung, left, shakes hands with Yoon Jong-ha, a partner of MBK Partners after signing an agreement for the group to acquire MBK's 59 percent stake in Orange Life at the Bae, Kim & Lee law firm in Gangnam, Seoul, Wednesday. Courtesy of Shinhan Financial Group |
By Park Hyong-ki
Shinhan Financial Group will soon regain the title of the country's biggest financial holding company by asset right after it completes its acquisition of Orange Life, formerly ING Life.
This comes after the group's board decision Wednesday to pursue the acquisition of a 59.15 percent stake in Orange from MBK Partners, a local private equity fund manager.
Shinhan and MBK signed the 59 percent share purchase agreement after the board meeting.
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The group will check the books of Orange and negotiate to buy 48.5 million shares of Orange worth nearly 2.3 trillion won ($2 billion), or 47,400 won per share, which includes management premium of 600 billion won.
Shinhan Financial said in a regulatory filing it would seek to buy the 59 percent stake "in cash."
It did not disclose exactly when it will complete the acquisition, but said the total cost could "change" as the two sides move forward in the takeover talks. It added the deal, if sealed, would need final approval from the Financial Services Commission, according to a regulatory filing.
The group said the Orange takeover would further help boost Shinhan's nonbanking business.
"Insurance is a good business to be in given the country's aged society and mature financial industry," a Shinhan official said.
"The acquisition of the insurer will help balance the group's businesses, which had been too focused on banking and credit cards."
It took about a year for both Shinhan and MBK to sign the share purchase agreement.
After Shinhan Financial signs the last piece of the takeover contract for the 59 percent stake after completing due diligence, it would mark Shinhan's third-biggest domestic deal after its acquisition of LG Card, now Shinhan Card, the biggest credit card company, and of Chohung Bank, now Shinhan Bank.
Shinhan Financial acquired LG Card for 7.2 trillion won in 2007, and Chohung Bank for 3.4 trillion won in 2006.
With Orange Life's assets worth 31.5 trillion won, Shinhan Financial Group's total assets would surpass 484 trillion won after the completion of the acquisition, according to the regulatory filing and Shinhan's semiannual financial report.
The deal would then spur Shinhan Financial to surpass KB Financial Group, the No. 1 financial holding company with assets worth 463 trillion won.
This is expected to push KB Financial to find acquisition targets as Chairman Yoon Jong-kyoo has said the group will pursue deals whenever the opportunity arises.
KB Financial had walked away from going after Orange as it believed MBK's asking price was too high. The group tried to acquire ING Life in 2012, but failed.
It said the group has been strengthening its nonbanking businesses over the last three years, and would seek deals as long as they further increase its overseas presence and profitability.
In his first three-year term, Chairman Yoon was able to boost the size and value of KB Financial through the acquisitions of Hyundai Securities and LIG Insurance, a general insurer.
Shinhan Financial Group Chairman Cho Yong-Byoung has sought to beef up its nonbanking businesses such as investment banking and insurance, saying he would seek to grow them both organically and inorganically.
Analysts say the Orange deal could spur Shinhan Life Insurance to catch up with NongHyup Life Insurance, the country's fourth-largest insurer, following the big three ― Samsung, Hanwha and Kyobo. Orange is the sixth-largest after Mirae Asset.
"What's left for Shinhan to do is to find ways to maximize synergy between Orange and the group," said Baek Doo-san, an analyst at Korea Investment Securities.
