ING Group has agreed to sell its South Korean life insurance business to local private equity firm MBK Partners for about Won1.84 trillion ($1.6 billion), the Dutch group said on Monday.
We’ve heard that before. ING last year was in exclusive talks to sell the life insurer - called ING Life Korea - to KB Financial Group and, when that deal fell through, it was in similar talks with Vogo Fund earlier this year.
Much is at stake: the clock is ticking and the price is dropping. The European Commission is forcing ING to sell its insurance business to repay the Dutch government for its bailout during 2008. ING Life Korea was the largest piece of its Asian life insurance platform.
ING has agreed with the European Commission to sell its controlling stakes in each of its Asian insurance units in 2013 and the rest by 2016.
The deal is still subject to regulatory approval, which is never a sure thing in Korea. ING said it expects the transaction to close late this year.
This deal has been a long time in the works. ING kicked off the auction of its Asian life insurance business last year.
After failing to sell the deal as a whole, ING elected to sell the Asian life insurer piecemeal.
KB Financial won the auction with a $2.1 billion bid. However, the deal fell through in December because the government wanted KB Financial to save its cash to buy Woori instead, according to people familiar with the situation.
By that stage, ING was looking desperate to potential buyers as it was under pressure from the government to sell. The auction was relaunched.
After Vogo bid about $2 billion it entered exclusive talks with ING. The fund was keen to combine ING Life Korea with its portfolio company Tongyang Life Insurance. However, Vogo Fund failed to come up with the financing.
This time ING is hoping this deal will be sealed. MBK has a track record of investments in financial services, including a bank, an insurance company, a leasing company and a consumer financing company in Korea and China.
ING has sweetened the deal with MBK by allowing ING Life Korea, Korea’s fifth-largest insurance company, to continue to operate under the ING brand for five years and providing technical support for one year.
ING said the transaction values ING Life Korea at 9.2 times earnings for the fiscal year ending on March 31 and 0.73 times book value as per March 31, both on a local Korean GAAP basis.
ING will also continue to hold 10% of ING Life Korea for an amount of Won120 billion.
“This transaction is a major step in the divestment of our Asian insurance and investment management activities,” said Jan Hommen, ING Group’s chief executive.
Barclays advised MBK on its purchase while Goldman and JP Morgan helped ING on its sale.