Hana Financial Faces 'One Mountain After Another' in Acquiring The-K Non-Life Insurance... Union Issues and Regulatory Approval Challenges

Union Opposition to Employment Succession Conditions at The-K Non-Life Insurance
Financial Authorities' Approval Review May Be Hindered Again by Major Shareholder Eligibility Assessment
Repeated Obstacles in M&A Involving Hana UBS Asset Management and Lotte Card

[Asia Economy Reporters Haeyoung Kwon, Minyoung Kim] Hana Financial Group's attempt to acquire The-K Non-Life Insurance is facing difficulties. The union of The-K Non-Life Insurance is opposing Hana Financial Group over employment succession conditions, and even if both sides reach an agreement, there is a high possibility that regulatory approval from financial authorities will block the deal. Following Hana UBS Asset Management, Lotte Card, and now The-K Non-Life Insurance, Hana Financial Group is repeatedly encountering obstacles in mergers and acquisitions (M&A).

According to financial authorities and the financial sector on the 7th, as Kim Jung-tae, chairman of Hana Financial Group, is pushing for the acquisition of The-K Non-Life Insurance to strengthen the non-banking sector, the eligibility of the major shareholder is emerging as a potential final variable in the regulatory approval process.

A financial sector official stated, "I understand that the prosecution's investigation into allegations of preferential promotion of a Hana Bank executive has not yet been concluded," adding, "This could be a reason to suspend the major shareholder eligibility review during the financial authorities' M&A approval process, making it difficult to clear the regulatory approval hurdle even if the acquisition contract for The-K Non-Life Insurance is signed."

Hana Financial Group resolved at its board meeting on the 20th of last month to acquire 70% of The-K Non-Life Insurance shares, which are 100% owned by the Korea Teachers' Credit Union. The sale price is reported to be about 100 billion KRW. The problem lies in the major shareholder eligibility review. Chairman Kim was reported to the prosecution in June 2017 on suspicion of preferentially promoting a Hana Bank employee who managed funds for Choi Soon-sil, and the prosecution's investigation is still ongoing.

The acquisition of Hana UBS Asset Management shares by Hana Financial Investment has also seen no progress for over two years due to this issue. In September 2017, Hana Financial Investment agreed to acquire 51% of Hana UBS Asset Management shares held by Swiss UBS AG, making it a wholly-owned subsidiary. However, in December of the same year, the Financial Services Commission suspended the major shareholder eligibility review due to the prosecution's investigation into preferential promotion allegations, and Hana Financial Investment has been unable to acquire the shares for over two years. It is also reported that UBS AG has conveyed to Hana Financial Investment its intention to file a lawsuit if the share acquisition contract is not fulfilled.

Typically, financial authorities review both the Financial Holding Companies Act and individual laws when assessing major shareholder eligibility for approvals. Depending on which law is applied, the outcome of the eligibility review may differ. The market widely expects that approval for The-K Non-Life Insurance acquisition will not be easy until legal uncertainties are resolved. Since the actual major shareholder is Hana Financial Group, suspending the asset management company acquisition review while allowing other affiliates could raise fairness issues, so a conservative regulatory review is anticipated.

A Financial Supervisory Service official said, "If Hana Financial Group applies for approval to acquire The-K Non-Life Insurance, we will review it."

To make matters worse, The-K Non-Life Insurance union is opposing Hana Financial Group because Hana deleted a pre-sale agreement condition between the union and the Korea Teachers' Credit Union that required consultation with the union when outsourcing employees. The union sees this as a prelude to restructuring. Hana Financial Group must first overcome union opposition and then clear the regulatory approval hurdle.

Hana Financial Group has recently failed to show significant results in domestic M&A. Although it acquired Korea Exchange Bank in 2012 and the remaining shares of Hana HSBC Life in 2013, subsequent acquisitions such as Hana UBS Asset Management, Lotte Card, and The-K Non-Life Insurance have all faced difficulties due to suspension of regulatory reviews, losing bids, and union opposition. Notably, before the Lotte Card acquisition bid in May last year, Chairman Kim personally visited Financial Supervisory Service Governor Yoon Seok-heon to request approval support, showing strong determination, but the bid ultimately went to the MBK Partners-Woori Bank consortium.

A financial sector official said, "Hana Financial Group started as a specialized bank in 1971 and has grown through M&A, but since acquiring Korea Exchange Bank, it has not achieved clear results domestically," adding, "Recently, there is analysis that Hana Financial Group may be shifting its focus to overseas M&A."

This content was produced with the assistance of AI translation services.