How will Woori benefit from takeover of Daol Investment?
Woori Financial Group headquarters in central Seoul / Courtesy of Woori Financial Group
By Anna J. Park
Woori Financial Group has been tapped as a preferred bidder for a takeover of Daol Investment, Korea's oldest venture capital firm and one of its best. The deal is expected to present a win-win outcome, as it should bolster Woori's non-banking business portfolio, while Daol Financial Group can dispel market concerns over its cash flow.
Daol Investment's public disclosure information uploaded on Tuesday afternoon confirmed the deal, stating that the company signed an MOU with Woori Financial earlier that day.
According to the agreed deal, Woori Financial will take over a 52 percent stake as well as the management rights of the venture capital firm from its largest shareholder, Daol Investment & Securities, Daol Financial Group's brokerage arm. The price that both companies agreed upon is known to be around 210 billion won ($169 million). The two companies are slated to begin due diligence soon, aiming to sign a stock purchase agreement (SPA) in the next month and to close the deal by March.
The deal is Woori Financial's first major M&A since November 2021, when the group achieved its complete privatization 24 years after receiving trillions of won from the government during the Asian financial crisis in the late 1990s.
Since then, Woori Financial has been vocal about its plans to strengthen its non-banking business portfolio through aggressive M&As. Woori Financial Chairman Son Tae-seung also placed the group's highest priority for this year in the expansion of non-banking subsidiaries via acquisitions.
“This year, Woori Financial Group will accelerate the speed of expanding its non-banking business portfolio, such as brokerage, insurance and venture capital, which the group put off last year due to market instability,” Son said during his New Year message in early January, pointing out the increased importance of strengthening stable profits derived from subsidiaries' key business areas when market conditions are unfavorable.
Because of the clearly outspoken goals, Woori Financial has been considered the most potent purchaser of the venture capital firm. Son is said to have had direct talks with Daol Financial's chairman regarding the takeover negotiations for Daol Investment.
Woori Financial attempted to acquire Daol Investment previously in 2020, but didn't succeed due to a failure to adjust a desirable price. Daol Investment, formerly KTB Network until February 2022, represents the country's first-generation venture capital firm with over 40 years of successful investments.
The venture firm has so far invested over 2 trillion won in some 1,200 startups both in Korea and abroad. Over 300 startups the firm invested in succeeded in going public. Its latest success stories include investments into Baedal Minjok, Korea's largest food delivery app, and fintech giant Toss.
After acquiring Daol Investment, Woori Financial is expected to push forward an active M&A strategy this year. The group's top priority in its M&A plan is now acquiring a brokerage. Woori is the only one of the country's five major financial groups without its own brokerage subsidiary.
Meanwhile, Daol Financial Group will now be able to breathe a sigh of relief, securing hundreds of billions of won that could solve its liquidity crisis. Since late last year, the group has been securing cash flows by selling its key affiliates, including its credit ratings service which was sold to local private equity firms. The group is also seeking to sell a controlling stake of its Thai subsidiary.
“Woori Financial Group is the optimal purchaser of Daol Investment, as it can induce its sustainable growth,” an official from Daol Financial Group said, adding that the group aims to find a new growth engine with the financial stability earned from the deal.