이 기사는 2020년 01월 09일 08:00 thebell 에 표출된 기사입니다.

The bid for Prudential Life Insurance of Korea is gaining traction with information memorandum (IM) sent to potential buyers.

According to M&A industry sources on January 3, U.S.-based Prudential Financial, a parent company of Prudential Life Insurance, and its lead sale manager Goldman Sachs will hold a preliminary bidding on January 20. So far KB Financial Group, Woori Financial Group and Hana Financial Group have received and reviewed IM. Among private equity (PE) firms, MBK Partners, Hahn & Company and IMM PE received IM.

At this stage, it is too early to predict how popular the deal will be. There sure are many potential buyers, including major financial groups and large PE firms, but it is unclear whether they actually will participate in the preliminary bidding. Financial groups are highly likely to participate in the bidding process as they have strong will to bulk up their non-banking portfolio through M&As.

Hana Financial Group is seeking to acquire insurance companies to strengthen its non-banking business, including The-K Non-Life Insurance. The group is mulling over the takeover of Prudential Life Insurance to bolster its life insurance business, which it operates under Hana Life Insurance.

KB Financial Group and Woori Financial Group also are showing a keen interest in Prudential Life Insurance to boost their life insurance business. Moreover, the leaders of the two Korean financial houses have strong will to make non-banking M&As. KB Financial Group is considered as one of the prime candidates to become the new owner of the life insurer. KB Financial Group Chairman Yoon Jong-kyoo has publicly expressed his will to acquire a life insurance company and has been in talks with the seller even before the process has been changed to a bidding competition.

Woori Financial Group has also shown great interest in beefing up its non-banking sector. After transitioning to a holding entity structure in January of 2019, it has acquired ABL Global Asset Management, Tongyang Asset Management and Kukje Asset Trust, a real estate management firm, but it doesn’t have a life insurer under its umbrella yet. “We will speed up the expansion of our business portfolio to securities or insurance that will improve the group’s profitability,” said Woori Financial Group Chairman Sohn Tae-seung.

South Korea’s major PE firms may consider engaging in the deal. MBK Partners already successfully sold off ING Life Insurance – rebranded as Orange Life Insurance – to Shinhan Financial Group in 2018 to reap two trillion won.

Hahn & Co. was selected as a preferred bidder for Lotte Card, although it was forced to walk away from the transaction. The PE firm has ample dry powder as it raised 3.8 trillion won for its blind-pool fund at the end of 2019.

IMM PE has aggressively invested in financial institutions, including Kyobo Life Insurance, Shinhan Financial Group and K bank. The firm has set up its in-house investment and management team specialized for the financial services industry. IMM PE is one of Woori Financial Group’s major shareholders. The firm might form a consortium later with strategic investors such as Woori Financial Group to participate in the bid, but nothing has been discussed as of yet.

MBK Partners received IM, but it is unlikely to participate in the deal. The PE firm can’t acquire a life insurer until September of 2020 as it accepted the non-compete clause when selling ING Life Insurance to Shinhan Financial Group in September of 2018. However, the PE firm may participate in the bid, depending on how smoothly the deal process goes.

Market watchers see the company’s valuation will determine the popularity. It is said that the sell-side wants price to book value ratio (PBR) of around one, while market watchers are largely pessimistic about this level as PBR of domestic life insurers ranges from 0.17 to 0.63. Also, more than one life insurers are expected to be put up for sale, which will give potential buyers more options and the sell-side may control the deal accordingly.

(By reporters Kim Hye-ran and Kim Byung-yoon)