By Park Jae-hyuk | Korea Times | March 1, 2020
MBK Partners, Hahn & Company and IMM Private Equity are facing another stumbling block to their ongoing bids to take over Prudential Life Insurance Company of Korea.
The Korea Finance Consumer Federation (KFCF) said Tuesday it jointly organized a committee with four other consumer groups to oppose the private equity firms (PEFs) that are trying to acquire the U.S. insurance giant’s Korean unit.
The KFCF urged the Financial Services Commission (FSC) to bar PEFs ― which the civic group defined as “vulture funds” interested only in profits ― from holding a controlling stake in an insurance company.
It also said lawmakers should revise laws to fundamentally prohibit PEFs from owning insurers.
“A life insurance company should not be a mere target for investment,” said Bae Hong in charge of monitoring the insurance industry at the KFCF.
“Benefits that are supposed to be paid to beneficiaries are coming from insurance companies’ assets, and the assets are necessary for at-risk policyholders to continue with their lives. PEFs that pursue short-term profits should be banned from acquiring insurance companies.”
The KFCF alleged PEFs are highly probable to seek unfair competition and exaggerate their assets, because they would sell the insurance companies they bought within a short period of time.
It said MBK exaggerated Orange Life Insurance’s value to sell it to Shinhan Financial Group.
According to the KFCF, such strategies allow shareholders to take assets away from policyholders.
Considering the financial authorities have put a top priority on consumer protection lately, the protest from the consumer groups could be influential enough to prompt the FSC to take measures against MBK and the other two domestic PEFs.
At the same time, this will be an opportunity for KB Financial Group and Taiwan’s Fubon Financial.
The two strategic investors have engaged in a fierce battle against the three financial investors to win one of the most lucrative items on the M&A market this year.
According to sources, all five bidders have offered around 2 trillion won ($1.6 billion) in preliminary bidding, showing the competition has heated up for the life insurer.
Against this backdrop, Woori Financial Group is still mentioned as a potential bidder, although it did not take part in the preliminary round.
Some observers expect Woori may join hands with Fubon which holds a 4 percent stake in Woori.
If the protest intensifies against a PEF’s acquisition of Prudential, Woori may lean more toward the partnership with Fubon, instead of an alliance with IMM which holds a 5.62 percent stake in Woori.
IMM had also been mentioned as one of Woori’s potential partners for the Prudential takeover.
The main bidding for Prudential is slated for March 19.
Prudential’s risk-based capital ratio ― a measurement of financial soundness ― stood at 515.04 percent in the third quarter of 2019, the highest among the nation’s insurance companies.
It ranked 11th in terms of assets and fifth in net profit in the first half of last year.