PE firms remain in the hunt for Kyobo Life

The second phase, which will see Posco-owned Daewoo International sell off a 24% holding, is still very much alive.

"The Daewoo process is much more involved than KAMCO," says one GP who participated in the bidding. "The KAMCO stake is one of the few remaining assets from the wave of restructuring in the late 1990s. They set a deadline and reach a decision quickly because it's a government-mandated auction."

Kyobo has already been subject to a private equity carve-up since KAMCO assumed control of the asset in 1999 after parent company Daewoo slid from being Korea's second-largest conglomerate to its most infamous bankrupt. A Corsair Capital-led group bought a 7.41% stake for $299 million in 2007, shortly before Standard Chartered Private Equity picked up 5.30% from two family shareholders for approximately $230 million.

Steelmaker Posco acquired 68% of Daewoo International for $2.8 billion in 2010, allowing KAMCO to exit its holding in the company. Posco wanted Daewoo International's raw materials trading business and came to own part of Kyobo as a by-product.

KAMCO first considered exit-by-auction from Kyobo as far back as 2003, prompting interest from private equity firms, but nothing came of it. This time around the PE firms have lost out again, as Canada's Ontario Teachers' Pension Plan was last week named as the preferred bidder, having reportedly agreed to a KRW470 billion ($398 million) valuation, or KRW230,000 per share for the 9.9% stake.

Investors including Affinity Equity Partners and The Carlyle Group were left empty-handed, but they remain in the running for Daewoo International's 24% interest, with bids having reached a reported KRW1.2 trillion. According to the GP that is participating in the process, Carlyle and Affinity are competing with Corsair, which already owns 5.28%.

With Korean regulations preventing foreign investors from owning more than 10% of an insurance company, the GPs have recruited partners. The Carlyle- and Affinity-led groups are said to include a Middle East sovereign wealth fund and Government of Singapore Investment Corp., respectively.

The successful private equity bidder's exit route is obvious. Samsung Life Insurance and Korea Life Insurance, the other two of the Big Three, are publicly listed and so Kyobo is ultimately expected to go the same way. "Several Korean life insurance companies have gone public in the last few years and this remains the trend," says the GP.

Macquarie and Woori Investment & Securities are advising Daewoo on the transaction.

 

 

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