Korea Investment Holdings (Korea Financial) is expected to accelerate its acquisition of a '50% + 1 share' stake in KDB Life Insurance. Korea Development Bank, which also aims to sell control of the company, is reportedly not insisting on selling its entire holding.
According to financial industry sources on the 29th, Korea Financial has been weighing specific transaction terms with Korea Development Bank since being selected as the preferred bidder for KDB Life Insurance. Korea Development Bank currently has put up 99.75% of its shares in KDB Life Insurance for sale. While it was initially assumed that Korea Development Bank would transfer most of its holdings at once, Korea Financial is reportedly planning to propose acquiring only 50% + 1 share.
This is interpreted as a strategy considering that the acquisition of an insurance company does not end with simply purchasing shares. This is because additional capital reinforcement may be required during KDB Life Insurance's process of restoring normal operations, potentially increasing financial burdens. From Korea Financial's perspective, rather than acquiring all of Korea Development Bank's shares and bearing all related burdens, it can acquire only the amount of shares necessary to secure control and establish a safety net through cooperation with Korea Development Bank.
From Korea Development Bank's perspective as well, maintaining a certain stake while cooperating with Korea Financial during the process of restoring normal operations creates opportunities, rather than risking the deal falling through by insisting on selling all its shares in KDB Life Insurance. Korea Development Bank has already taken steps to improve KDB Life Insurance's financial structure through a capital reduction without consideration, indicating strong intent to sell this time. KDB Life Insurance is scheduled to hold an extraordinary general meeting of shareholders on the 15th of next month to approve a capital reduction proposal of 83.33%. This involves consolidating six existing shares into one to reduce the number of issued shares and lowering the capital from 583.1 billion won to 97.2 billion won.
This is interpreted as a measure to lower the acquirer's financial burden in advance to facilitate the transaction. Typically, a rights offering (paid-in capital increase) follows a capital reduction without consideration. Last year as well, after KDB Life Insurance underwent a capital reduction without consideration, Korea Development Bank conducted a rights offering (paid-in capital increase) of 515 billion won, resulting in additional capital investment following the reduction. Accordingly, how much additional capital Korea Financial or Korea Development Bank will invest after the reduction is also expected to be a key variable in negotiations between the two parties.
The insurance industry cites as a critical issue how far the acquirer's financial burden can be reduced, given that the sale of KDB Life Insurance has fallen through multiple times in the past. In fact, KDB Life Insurance's K-ICS (Korean Insurance Capital Standard) ratio was at 78.66% before transitional measures as of the first half of this year, requiring at least 1 trillion won in capital reinforcement to meet the financial authorities' recommended standard of 130%.
Korea Development Bank is also reportedly placing more weight on transferring control rather than selling its entire stake. A Korea Development Bank official said, "We have not yet received a proposal from Korea Financial to acquire part of the shares," adding, "We are proceeding with negotiations according to our original sale plan."
in FINANCE
