Big bid for KDB Daewoo pays off for Mirae

Park Hyeon-joo is already an iconic figure in Korea’s business circles: he went from average stockbroker on a trading desk to start one of the country’s leading brokerage firm. His reputation is taking another leap as he gets closer to becoming the owner of the country’s biggest stockbrokerage firm.

On Christmas Eve, the Korea Development Bank (KDB) announced that Park’s Mirae Asset Securities was the primary bidder for a 43 percent stake in the country’s second-largest brokerage firm, KDB Daewoo Securities, as well as the wholly-owned KDB Asset Management in a package deal.

The decision by the state-run bank was swift considering it was only two days ago it accepted bidders for the brokerage. Other contenders were KB Financial Group and Korea Investment Holdings. Many market watchers bet KB would be the new owner.

If negotiations go smoothly and KDB Daewoo Securities is combined with Mirae Asset, it will become a mega brokerage firm with equity capital almost twice the size of current No.1, NH Investment & Securities. Mirae Asset is now No. 4.

The secret to Mirae Asset’s success with its bid was an aggressive bet made by Park.

Mirae Asset offered 2.4 trillion won ($2 billion) for the brokerage firm, which was the highest bid. On top of the 1.78 trillion won book-value that KDB Bank was asking for plus the usual premium added on the local merger and acquisition market, Park added an additional 100 billion won to 400 billion won. The premium is usually 20 to 30 percent.

Mirae Asset outbid competitors Korea Investment Holdings, which proposed 2.2 trillion won, and KB Financial Group, which offered less than 2.1 trillion won.

Park is notorious for making bold bets.

He was exceptional even as an ordinary broker.

After setting foot in the financial industry by joining Dongwon Securities in 1983, he climbed the ranks with exceptional speed. In just 45 days working at Dongwon Securities he got his first promotion. Thirteen months later he was promoted again and by the age of 32 he became the youngest head of a branch.

His ambition didn’t stop at Dongwon Securities. In 1997 he created his own company Mirae Asset Venture Capital and not long after Mirae Asset Global Investment. In 1998 he launched the country’s first mutual fund, which reached its limit of 50 billion won in just three hours.

Mirae Asset’s success continued on as Korea was introduced to investment funds. But Park’s appetite didn’t stop at the local market and he started to turn his interest to the global market. In 2003, Park established Korea’s first overseas asset management firm in Hong Kong. Today the brokerage group has branches and offices in 12 countries.

The recent bid for KDB Daewoo Securities showed how he takes different paths than his competitors.

Until last summer, Park seemed to put all his chips on winning a government license to start an Internet bank. As the brokerage industry has been struggling from shrinking investments on the lukewarm stock markets, all brokers needed to find a new growth engine.

For the Internet bank license, many brokerage houses were trying to partner with Korea’s leading social network company Kakao, but the IT company finally linked up with Korean Investment & Securities.

Park unexpectedly gave up on the Internet bank idea. Instead he changed course to compete for KDB Daewoo Securities.

The primary reason Park was so aggressive on KDB Daeweoo Securities is his dream of turning Mirae Asset Group into Asia’s biggest financial investment company to compete with global companies like Morgan Stanley, Merrill Lynch and Goldman Sachs.

If the acquisition is completed, Mirae Asset will emerge as a mega brokerage with equity capital of nearly 8 trillion won.

Its investment banking businesses will see an exceptional improvement particularly since KDB Daewoo Securities currently holds the No.1 position in bond management and finance investment.

Additionally it will have 12 overseas branches, which will be the largest number of overseas branches among Korean brokers.

But Park also needs to solve problems that emerge with the buying of KDB Daewoo Securities. The biggest problem is Mirae Asset Capital, which is the mother company of Mirae Asset Securities.

The merged brokerage firm will become an affiliate of Mirae Asset Securities, where Park is the majority stakeholder. There are no problems under the current law but once a revised bill on credit-specialized financial companies or loan providers passes the National Assembly, the situation changes.

Under the revised bill, a credit-specialized financial company has to limit the stake it has in affiliates to 100 percent of its equity capital.

However, the combined shares that Mirae Asset Capital has in both Mirae Asset Securities and Mirae Life Insurance as of end of September are worth 883.1 billion won, exceeding Mirae Asset Capital’s 590.3 billion won. That means Mirae Asset Capital has to increase its equity capital through paid-in capital or to sell off the stake it holds in the affiliates.

But when selling off shares to other investors, Mirae Asset Capital could be vulnerable to hostile takeovers.

BY PARK JIN-SEOK, KIM KYUNG-JIN AND LEE HO-JEONG [lee.hojeong@joongang.co.kr]