ING Groep NV sold its South Korean insurance unit on its second attempt within a year, raising about 1.84 trillion won ($1.7 billion) from MBK Partners Ltd., the Asian buyout firm formed by ex-Carlyle Group executives.
MBK will pay the proceeds in cash and ING will get an indirect stake of around 10 percent in ING Life Insurance Korea Ltd. for about 120 billion won in the unit, ING said in a statement today. The South Korean operation will continue working under the ING brand for as long as five years, it said.
The disposal in Asia brings ING closer to the end of a restructuring plan imposed by European Union regulators that forced the company to sell its global insurance operations. The takeover is the biggest purchase of financial assets for Seoul- based MBK, according to data compiled by Bloomberg.
“Maintaining the ING brand will be a big help to MBK,” said Lee Chul Ho, a Seoul-based analyst at Korea Investment & Securities Co. “MBK should ponder its strategy to restructure the insurer amid this low-growth, low-rate era for its exit some day. As the South Korean economy is facing slower growth, it’s the agenda for every insurer here.”
MBK and ING plan to complete the deal by the end of 2013 subject to regulatory approval, Amsterdam-based ING said in today’s statement.
Shares of ING declined as much as 1.9 percent and were trading 1.4 percent lower at 8.660 euros as of 11:07 a.m. in Amsterdam.
The transaction comes eight months after ING’s plan to sell the Korean life insurance business to KB Financial Group Inc. collapsed. In December, KB Financial’s board scrapped buying the unit, saying it’s a “critical time and it’s important to maintain a high capital-adequacy ratio amid the economic uncertainty.” ING had planned to get about $2 billion from the sale.
ING expects to book about 950 million euros ($1.27 billion) after-tax loss in the third quarter of 2013 from the sale of Korean life businesses, according to today’s statement. The transaction represents 9.2 times of fiscal year 2012 earnings of ING’s Korean life insurance unit and 0.73 times of its book value, ING said in the statement.
“Seems like the acquisition price is quite attractive for MBK,” said Michael Na, a Seoul-based analyst at Nomura Holdings Inc. “Once MBK places right management and maps a good strategy, it may sell it back with good returns.”
ING Life Insurance Korea had 23.3 trillion won in assets as of March, making it the fifth-largest life insurer in the nation by assets, according to company data on its website. Net income for the fiscal year ended March declined to 199.3 billion won from 241 billion won a year earlier, according to the data.
ING’s Chief Executive Officer Jan Hommen, 70, who will step down in October, has raised 23 billion euros through more than 35 disposals since taking the helm in 2009.
“This transaction is a major step in the divestment of our Asian insurance and investment management activities,” Hommen in the statement. “Together with the scheduled payment of the next tranche of the core Tier 1 securities to the Dutch State in November 2013, this will bring us further into the end phase of the restructuring of our company.”
ING, under orders to sell more than 50 percent of its Asian insurance operations before the end of the year, last year succeeded in disposal deals for businesses in Hong Kong, Macau, Thailand and Malaysia, with 1.7 billion euros in gains within a month. Last month, ING agreed to sell its Korean investment management business to Macquarie Group Ltd.
South Korea’s financial regulator in November said it’s studying the impact of low-interest rates and low economic growth on the insurance industry.
ING entered South Korea’s insurance market in 1987 with a branch office and set up a locally incorporated unit in 1991, according to ING Life Insurance Korea’s website. It hired more than 1,000 staff as of March, according to the website.
Seoul-based MBK fund focuses on buyout transactions in Korea, Japan and the Greater China region. The private-equity firm acquired Invoice Inc., a Japanese provider of telecommunications billing services, for $211 million in 2010. It also bought Universal Studios Japan in 2009 and acquired Tasaki & Co., a Japanese jewelry retailer, in 2008, according to the company’s website. The fund was trying to sell accounting software maker Yayoi Co. in 2011, two people with knowledge of the matter said at the time.
ING was advised by JPMorgan Chase & Co. and Goldman Sachs Group Inc. MBK was advised by Barclays Plc.
With assistance from Jonathan Browning and Cathy Chan in Hong Kong. Editors: Andreea Papuc, Tomoko Yamazaki
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