KDB Life Sale Imminent... Chairman Lee Dong-geol Untangles Challenges

Private Equity Fund 'JC Partners' as a Preliminary Bidder... Attention on Whether It Will Also Resolve the Sale of Daewoo Construction and Daewoo Shipbuilding

[Image source=Yonhap News]

[Asia Economy Reporter Kangwook Cho] Lee Dong-geol, Chairman of KDB Industrial Bank, is unraveling the long-standing challenges starting with KDB Life Insurance. The possibility of KDB Life Insurance, which had its sale fail three times over the past decade, finding a new owner after the fourth attempt has increased significantly. With Lee's term set to expire in September, attention is focused on how he will resolve pending tasks such as the sales of Daewoo Construction and Daewoo Shipbuilding & Marine Engineering during his remaining tenure.

According to sources from the Industrial Bank and the financial sector on the 13th, mid-sized private equity fund (PEF) JC Partners recently completed due diligence and management interviews regarding KDB Life Insurance. An Industrial Bank official stated, "Among the bidders who entered the preliminary bidding, JC Partners was the first to complete due diligence," adding, "Following the main bidding, the preferred bidder selection will proceed, but due to the spread of COVID-19, the schedule has not yet been determined."

Industry insiders believe that the Industrial Bank, which holds KDB Life Insurance, and Kansas Asset Management are likely to select JC Partners as the preferred bidder for acquiring KDB Life Insurance. JC Partners plans to purchase 92.73% of KDB Life Insurance's shares for approximately 200 billion KRW and then inject an additional 300 billion KRW through a paid-in capital increase. Furthermore, JC Partners is reportedly proposing a blueprint to transform KDB Life Insurance into a co-reinsurance company in collaboration with the reinsurance division of the U.S. PEF Carlyle.

KDB Life Insurance has been considered a "painful finger" for the Industrial Bank. After taking over the company during Kumho Group's restructuring in 2010, the bank initially planned to resell it within five years, but all three sale attempts failed. During this process, its business capabilities weakened, and financial soundness deteriorated significantly. Since his appointment in September 2017, Chairman Lee has focused on normalization efforts, including recruiting insurance expert Professor Jeong Jae-wook from Sejong University's Business Administration Department as KDB Life Insurance's president in February 2018. This led to KDB Life Insurance, which had recorded losses for three consecutive years since 2016, turning a profit with a net income of 34.4 billion KRW on a consolidated basis last year. However, if the sale price is decided as proposed by JC Partners, controversy over a fire-sale price is inevitable. Previously, the Industrial Bank spent 650 billion KRW solely on acquiring KDB Life Insurance. Including paid-in capital increases, the total funds poured into KDB Life Insurance are estimated to reach 1.25 trillion KRW.

Even if the acquisition of KDB Life Insurance is finalized, Chairman Lee faces numerous challenges. The Industrial Bank accelerated the sale of Daewoo Construction by selecting Hoban Construction as the preferred bidder in 2018, but the deal failed when Hoban Construction withdrew. In March last year, a formal acquisition contract was signed with Hyundai Heavy Industries Group for Daewoo Shipbuilding & Marine Engineering, but the results of the corporate merger review have not yet been released. The ongoing sale of Asiana Airlines is also facing extreme speculation that HDC Hyundai Development Company may withdraw due to an unprecedented downturn in the aviation industry. The Industrial Bank is also central to supporting Doosan Heavy Industries and Ssangyong Motor, both struggling financially.

Market consensus suggests that due to the impact of the COVID-19 pandemic worsening corporate performance, it will be difficult for Chairman Lee to resolve the accumulated challenges by his term expiration in September unless he is reappointed.

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