FSC clears way for MBK to acquire ING Korea

Korea approved the largest insurance industry acquisition in the local market yesterday.

The Financial Services Commission (FSC) yesterday said it approved of the nation’s largest private equity fund, MBK Partners, acquiring ING Life Korea from its Dutch owner.

MBK Partners agreed with ING Group in late August to buy a 100 percent stake, or 8.2 million shares, of the insurance unit for 1.8 trillion won ($1.7 billion).

This surpasses the previous record when Daewoo International sold Kyobo Life Insurance’s 24 percent stake to a consortium led by the private equity firm Affinity Equity last year for 1.2 trillion won.

The approval by the authorities was the last obstacle for the Korean equity fund, which managed more than 4 trillion won as of last year, to take over the Dutch unit.

The approval has been pending since it was submitted to the FSC on Sept. 16. The market expected it last month because current financial laws require financial authorities to review an acquisition for at least 60 days.

But the authorities have been taking extra precautions and requested additional information from MBK in October.

This was largely due to the continuing fallout from the takeover by the U.S. private equity fund Lone Star of Korea Exchange Bank in 2004. There is still talk that the U.S. fund profited exceptionally from buying one of Korea’s leading banks. As a result, the authorities have become cautious about approving private equity funds taking over large financial institutions.

The approval ends a long search by the Dutch financial group. In 2008, ING Group promised to sell more than 50 percent of its share in its Korean insurer by the end of this year and sell all of its holdings by 2016 in exchange for a bailout fund amounting to 10 billion euros ($13.7 billion) by the Dutch central bank. But the search was never easy.

Last year, the Korean financial group KB and the Dutch financial company were negotiating a 2 trillion won deal, but it fell through.

The Dutch group tried its luck again this year when it announced in February that it would sell a 51 percent stake of the insurance unit and started accepting bidders in May.

A month later, a Tongyang-Vogo Fund consortium was selected as a primary negotiator. However, the primary negotiator was changed to MBK Partners in early August.

The deal is considered good for the Korean private equity fund as the value of the insurance company was once considered to be more than 3 trillion won.

ING agreed to reinvest 10 to 11 percent of the acquisition price by MBK Partners in the insurer, while MBK agreed not to put the insurance company back on the market for sale for two years.

BY lee ho-jeong [ojlee82@joongang.co.kr]