Dutch insurer ING offloads its South Korean unit to MBK Partners

The Dutch insurer edges closer to its goal of divesting its Asian operations by the end of the year with only its Japanese unit left to sell

PUBLISHED : Monday, 26 August, 2013, 2:54pm
UPDATED : Tuesday, 27 August, 2013, 4:15am

Dutch insurer ING edged closer to completing its year-and-a-half-old Asian divestment plan after private equity firm MBK Partners agreed to buy its South Korean insurance unit for 1.84 trillion won (HK$12.82 billion) in cash.

Under the agreement announced yesterday, bailed-out ING will retain a stake of about 10 per cent in the Korean unit and allow MBK to use the ING brand for up to five years.

The sale of the Korean unit will leave ING with its Japan insurance unit left to sell, bringing it closer to fulfilling its agreement with European regulators to offload more than 50 per cent of its Asian operations by the end of this year.

Since its rescue in 2008, ING has dismantled its once-fashionable banking and insurance model and announced thousands of job cuts and other cost savings. ING has raised about €23 billion (HK$238 billion) from divesting insurance, investment management and other assets to repay state aid.

ING will own a 120 billion won stake in the Korean unit, confirming an earlier report.

"I am convinced that with the support of MBK Partners, ING Life Korea will continue to grow its customer offering and build on its position as the fifth-largest insurance company in the Korean market," ING chief executive Jan Hommen said in a statement.

"Through its 10 per cent stake, ING will be able to benefit from that growth potential."

The deal valued ING Life Korea at 9.2 times its earnings for the past fiscal year and 0.73 times its book value as of March 31 this year, the statement added.

Korean life insurers trade, on average, at a price-book ratio of 0.83.

ING will take an after-tax loss of about €950 million to be booked in the third quarter of this year. The transaction is subject to regulatory approval and is expected to close in the fourth quarter.

Shares of ING were trading 0.8 per cent lower at €8.717 in Amsterdam yesterday morning.

Established in 1987, ING Life Korea is Korea's largest foreign life insurer, with about 1.3 million customers, more than 1,000 employees and about 6,800 tied agents.

MBK, which is seeking about US$2.6 billion in a new private equity fund, will finance the deal with a 1 trillion won syndicated loan, Basis Point reported last week.

MBK is the largest private equity firm in Korea, with more than US$8 billion in capital under management.

If completed, it will be Korea's largest insurance merger and acquisition deal, surpassing the US$1 billion purchase of a 24 per cent stake in Kyobo Life Insurance last year by a consortium led by private equity firm Affinity Equity.

MBK recently entered exclusive talks for the controlling stake after the insurance unit attracted four bids in May, including from Tong Yang Life Insurance, Hanwha Life Insurance and Kyobo Life Insurance, sources previously said.

But the sale of the Korean unit has never been a smooth process. In December last year, KB Financial walked away from a US$2.1 billion bid to buy ING Life Korea. In June, a Tong Yang-Vogo Fund consortium also dropped out after entering exclusive talks to buy the unit.

ING's Japanese insurance unit stopped selling variable annuities in 2009 and it is unclear when ING will reach an agreement on its sale.

The Japanese financial regulator was reluctant to let a private equity firm own that business, sources said.

ING is also seeking buyers for its stake in Thailand TMB Bank.

The company sold its Hong Kong, Macau and Southeast Asian insurance operations for a combined US$3.87 billion last year in an auction that generated strong bidding.

A spokesman for MBK, a buyout firm formed by former Carlyle Group executives, declined to comment.

ING was advised by Goldman Sachs and JP Morgan, while Barclays was the financial adviser to MBK, sources said.

MBK focuses on buyout transactions in Korea, Japan and China.

The private-equity firm acquired Invoice, a Japanese provider of telecommunications billing services, for US$211 million in 2010.

It also bought Universal Studios Japan in 2009 and acquired Tasaki & Co, a Japanese jewellery retailer, in 2008, according to the company's website. It was trying to sell accounting software maker Yayoi in 2011, two people said at the time.

Additional reporting by Bloomberg