KB’s bid to buy ING Life is shot down by board

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KB’s bid to buy ING Life is shot down by board

KB Financial Group’s grand ambition to become the nation’s fourth largest life insurer by acquiring ING Life Korea collapsed after meeting strong opposition from its board.

KB’s board sat down yesterday afternoon to decide whether or not to acquire ING Life Korea and concluded to reject a deal with too many risks.

Yesterday’s decision came three months after KB Financial was chosen as the preferred bidder to take over ING Life Korea in September.

A successful takeover of ING Life Korea would have paved the way for the nation’s No. 2 banking group to have an insurance subsidiary that ranks fourth among local insurance companies, trailing Samsung Life Insurance, Hanwha Life Insurance and Kyobo Life Insurance.

“We decided to scrap our plan to acquire ING Life Korea,” said an executive at KB. “The board members agreed on the idea of securing new sources of revenue by seeking a merger or acquisition of an insurance company to expand its nonbanking portfolio, but they decided that keeping the balance sheet healthy to help the group survive next year’s gloomy economic outlook, the household debt problem [in Korea] and euro zone fiscal crisis is the top priority.”

The executive said pushing the acquisition at a time when the current administration is ending could also have influenced the decisions.

Among the 12 board of directors, five voted in support of the deal, another five opposed and two abstained. The proposal needed the support of seven board members to pass.

The chances of Korea’s No. 2 banking group taking control of the nation’s No. 4 player had been cloudy due to opposition by outside directors, who believed next year’s grim economic outlook would undermine profitability in the insurance sector. They also argued the acquisition was too costly.

KB Financial Group Chairman Euh Yoon-dae has been spearheading the move to acquire the Korean insurance unit of Dutch banking giant ING Group to enhance its nonbanking portfolio.

Currently, more than 90 percent of KB Financial Group’s revenue is generated by its flagship KB Kookmin Bank. KB Financial Group has KB Life Insurance under its wing, the industry’s No. 15.

ING Life Korea posted an operating profit of 329.8 billion won ($307 million) last year, up from 230.4 billion won in 2010.

Dutch banking giant ING Group put its Asian insurance and asset management operations up for sale because it was ordered by the European Commission to sell its global insurance arm in return for state aid it received during the 2008 financial crisis.

Meanwhile, the failure of the deal was forecast by some market watchers after news reports said earlier this month that KB Chairman Euh had a shouting match with board members during a trip to Beijing in November.

Reports said an apparently drunk Euh broke a drinking glass at a dinner and yelled at directors about opposition to the acquisition.

Euh said the acquisition wasn’t based on his personal interest, indirectly rejecting rumors that he wants to get reappointed to his post after a successful takeover of the insurer.

By Kim Mi-ju [mijukim@joongang.co.kr]

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