Hana Financial, KDB Life M&A Decision Possibly This Week... Acquisition Likelihood ↑

Due Diligence on KDB Saengmyeong Acquisition Completed Last Month
Chairman Ham Likely to Decide Ahead of Morocco Trip Next Week
IBK Also Rushing Ahead of Month-End National Assembly Audit

Hana Financial Group is expected to decide as early as this week whether to acquire KDB Life Insurance. Hana Financial Group Chairman Ham Young-joo is scheduled to depart for an overseas business trip next week, and with the Industrial Bank of Korea facing a national audit later this month, it is interpreted as a move to quickly reach a conclusion and proceed to the next step.

According to industry sources on the 5th, Hana Financial Group completed due diligence on KDB Life Insurance at the end of last month and is awaiting Chairman Ham's final decision. Since Chairman Ham must attend the International Monetary Fund (IMF) and World Bank (WB) Annual Meetings held in Marrakech, Morocco, from the 9th to the 15th, it is expected that a decision will be made within this week. The Industrial Bank of Korea also needs to finalize various negotiation matters and prepare for the national audit scheduled for the 24th, so it is necessary to wrap things up by early this week.

There is growing speculation that Hana Financial will conclude to acquire KDB Life Insurance. Although the acquisition cost is in the trillion-won range, it is said that Chairman Ham is strongly intent on strengthening the insurance portfolio within the group. An industry insider explained, "While key executives within Hana Financial Group voiced that KDB Life Insurance is not a good asset, Chairman Ham's acquisition will is firm," adding, "He likely made various political judgments as well as aiming to expand the group's insurance business and strengthen the non-bank business structure."

Meanwhile, the Industrial Bank of Korea has also proposed measures to reduce Hana Financial's burden, such as participating in KDB Life Insurance's paid-in capital increase and offering discounts on the existing share price. The Industrial Bank is also strongly motivated to succeed in its sixth attempt to sell, as it wants to focus on relocating to Busan in line with the government and ruling party's intentions. This is interpreted as a decision to minimize noise ahead of the national audit.

The cost of acquiring KDB Life Insurance is expected to far exceed the market's estimated appropriate sale price of 200 billion won. It is estimated that more than 1 trillion won will be needed to cover the paid-in capital increase, eliminate debt, and normalize management. However, given that financial holding companies have experienced an unprecedented boom, this amount is not a significant burden for Hana Financial. As of the end of the first half of this year, Hana Financial Group's cash and cash equivalents totaled 35.6998 trillion won.

An insurance industry official said, "Although a considerable cost will be required immediately to resolve the negative margin risk of high-interest savings-type insurance policies that KDB Life Insurance holds in large numbers, it is not a level that Hana Financial cannot handle," adding, "Insurance, especially life insurance, relies heavily on sales organizations, so it will help strengthen the insurance portfolio within the group in the future."

Hana Financial Group, KDB Life M&A Decision Possible This Week. Photo by Jo Yongjun jun21@

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