Vogo takes control in Korea’s Tong Yang

The group paid KRW18,000 ($15.98) per share. Vogo now holds a controlling stake of 63.5%. According to the firm, one-third of the deal amount, or $266 million, will be leveraged through acquisition financing.

Vogo’s initial investment in Tong Yang Life Insurance in 2006 was made through Vogo Fund I, which took a 17% stake. Recently, the firm set up a project-specific fund called Vogo Fund II, dedicated to the acquisition of Tong Yang Life’s controlling stake. LPs for Fund II included local groups like the National Pension Service, other smaller pension funds, and financial institutions. Jason Shin, Managing Partner of Vogo Fund, told AVCJ.

Shin commented on the deal, “These days, certain Korean conglomerates are proactively divesting their assets in order to deleverage and restrucre their groups. It is also notable that prices of assets are becoming more reasonable than about two to three years ago before the GFC, when Korean strategic investors undertook highly leveraged deals.”

In Korea more and more companies, particularly mid-sized enterprises and conglomerates, are realizing that they need to divest non-core assets in order to restructure the overall business and to monetize existing holdings. Shin said that this trend has been accelerating in part because of the tightening of bank lending policies, and in part due to the hangover effects from aggressive and highly leveraged M&A activities of large corporates pre-GFC.

In the case of Tong Yang Group, which comprises three core businesses – cement, financial services, and construction – the senior management was acutely aware of the need to transform the group structure. This is a marked change from entities like the Kumho Group, which was forced to sell off assets to repay mounting debts.

Vogo will send three directors to Tong Yang Insurance while Tong Yang will continue to have two directors on board. Shin said that the current management team of the insurer will remain in place as they are highly skilled and have the full trust of the firm. However, the company will hire a new chief risk management officer, as it is essential to look at risk-related issues in order to grow further. The life insurer’s net profit has been forecasted at KRW160 billion ($142 million) for the full year 2010. Shin said that going forward, the company will focus on developing protective insurance plans – a space that has significant room to grow in South Korea. 

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• Topics
• North Asia
• Financials
• Buyouts
• Buyout
• Vogo Investment
• Jason Shin