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Korean private equity firm MBK Partners has shelved its plan to sell its 59.19% stake in ING Life Insurance Korea (ING Korea) after two potential buyers backed out of the deal.
KB Financial Group is the latest candidate to pull out of the transaction, which was valued at an estimated US$2.3 billion,
“We’ve considered acquiring ING Life, but KB Financial doesn’t have plans to adhere to the spend-it-or-lose-it philosophy,” an official of KB Financial was quoted as saying by the Korea Times. “MBK Partners is asking KB to pay more in exchange for getting the management rights of ING Life and that’s beyond our budget.”
One of KB’s domestic rivals, Shinhan Financial Group, also disengaged from talks with MBK Partners due to differences in valuation of ING Korea. Shinhan had initially targeted the insurer as part of its plans to diversify into non-banking financial business.
Earlier, interest from Chinese buyers in ING Korea waned due to geopolitical tensions between Beijing and Seoul over the installation of the US’s Terminal High Altitude Area Defence (THAAD) anti-missile system in South Korea.
Had the deal been successful, the sale of ING Korea would have set the record for the largest insurance takeover in the country. The insurer reported KRW4.34 trillion (US$4.61 billion) in revenue last year, with net profit of KRW340 billion (US$3.17 million). MBK bought the Korean life insurance operations of Netherlands-based ING Group in 2013 for around KRW1.8 trillion (US$1.6 billion). While KB and Shinhan offered to buy the insurer for up to KRW2.5 trillion, MBK is reportedly holding out for a price tag of KRW2.9 trillion.
The KB Financial official added that the licence to use the ING brand will end this year, which is why MBK seemed in a hurry to sell the insurer. Brand recognition is very important in the Korean insurance industry, the official said, arguing that KB’s and Shinhan’s lower valuations were correct, considering the situation.
ING Korea’s financials look solid for the foreseeable future, with its risk-based capital (RBC) ratio exceeding 500% even with IFRS 17 applied. Meanwhile, other insurers in the market have RBC ratios between 200% and 300%. The bare minimum RBC ratio set by the Financial Supervisory Service is 150%.
