Prudential looks set to sell two of their Korean units for twice as much as they paid for them, a move that may spark large-scale consolidation.
Prudential to pick Korea units buyer soon -bidder
SEOUL, Jan 12 (Reuters) – Prudential Financial Inc, the second-largest U.S. life insurer, is planning to pick a preferred buyer of its South Korean arms by early February, an official said, in a deal estimated at up to about $900 million.
Hanwha Securities, a medium-sized domestic brokerage, has submitted a bid for Prudential Investment & Securities and its fund management affiliate, a Hanwha official told Reuters on Tuesday, confirming market rumours. “
A preferred buyer will be picked either later this month or early February. We are doing a due diligence study now,” the Hanwha official said, asking not to be named until the procedure is made public.
The U.S. insurance group has put both Prudential Investment & Securities and Prudential Asset Management up for sale, but it is unknown whether the two entities would be sold in a package or separately.
A Prudential official in Seoul said that four to five bidders appeared to be participating in the auction, including KB Financial Group, the parent company of top domestic bank Kookmin.
Securities companies in South Korea have been sought after by both financial and non-financial companies, as brokerage firms have been given a larger scope of business under a new capital markets law introduced last year.
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Prudential Financial, purchased Hyundai Investment and Securities and, Hyundai Investment Trust Management from the Korean Deposit Insurance Corporation, for US$391mn back in 2003.
In October of 2009, Corporate Financing Week in the article ’Prudential Sale Heralds Sea Change In S. Korean Financial Sector‘ took a closer look at the ramifications of the Prudential sale -
Standing alone, the announcement that Prudential is mulling the sale of its investment and fund management units in South Korea represents nothing more than an international firm shedding its non-core assets in the wake of an economic downturn.
However, upon digging a little deeper, it seems the move by the US’s second biggest life insurer is just the tip of the iceberg; lifting the lid on a glut of potential deals in the pipeline. It seems the South Korean financial sector is starting to resemble something of an auction house.
So, why is the firm selling off its profitable businesses in the country’s $300USbn per annum asset management sector?
Well, a new capital market law brought into effect in February gave brokerage companies a larger scope for their operations, allowing banks and securities firms to engage in each other’s businesses.
This financial deregulation has made securities companies more attractive for financial and non-financial companies alike, and furthermore it has given way to a wave of new entrants into the sector, creating an arena where more than 100 firms now compete.
… the impending sale of Seoul-based Prudential Investment & Securities and Prudential Asset Management, is expected to help fuel M&A activity in the local brokerage sector. Industrial majors are busy seeking out opportunities to either enter or strengthen their presence in the financial industry in a move which is set to restructure South Korea’s financial landscape.
For more information regarding investment opportunities resulting from the financial industry consolidation, please contact us at investment@kotra.or.kr.
(Source: Ministry of Strategy and Finance, Reuters, Corporate Financing Weekly, articles have been edited for length)
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