Korea’s private equity firms mull jointly buying regional financial group

[Courtesy of MBK Partners]

A group of private equity firms in South Korea is planning to join forces to buy a regional financial group to expand their influence in the country’s financial sector dominated by five major holding companies.

According to multiple sources from the investment banking industry on Thursday, a council representing managers of Korean private equity firms has launched work to acquire a regional financial group in a club deal. There are about 50 members, including the chair company JKL Partners, MBK Partners, IMM PE, STIC Investment, VIG Partners and Unison Capital.

“If three to four large PEs join forces and acquire 10 percent stake in a regional financial holding company each, they will be able to secure management control,” said an unnamed industry official. “The acquisition will be achieved after holding talks with the shareholders of a regional financial entity that are willing to sell shares.”

The official added that the PEs are capable of creating a fund worth trillions of won and that they will be required to seek approval from the financial authority.

The PEs in the long run is hoping to expand operations by binding regional financial groups such as BNK, DGB and JB, and potentially acquiring the Korean operations of a foreign lender.

If the PEs manage to gain control of a regional financial group, the country’s financial holding company structure focused on five entities will be reorganized to involve six.

A public-private task force created to spur competition in the banking sector discussed measures last month to transform regional banks to commercial lenders if they meet the requirements such as capital and governance. The move is aimed at allowing regional banks to also become larger entities with increased presence in the financial market.

The PEs are confident that they will be able to manage a financial entity that can compete with the existing five top financial holding companies.

“Current financial holding companies with dispersed ownership are in a structure where the board members focus only on building a trench for their own benefits,” said an unnamed PE official. “The PEs will be able to resolve the chronic issue of financial undervaluation by carrying out efficient management with a clear purpose of improving corporate value.”