Gung-ho for Kyobo as buyout firms assess stake
Potential private equity buyers, specifically Affinity Equity Partners and the Carlyle Group, are doing due diligence on a potential 24% significant minority stake opportunity in Kyobo Life Insurance Co., Korea’s third-largest insurer and second-largest in the corporate pensions market, according to Korean reports.
The stake could be worth up to $697 million.
The opportunity may arise as a consequence of local steel-focused conglomerate Posco’s takeover of trading company Daewoo International. Daewoo International holds the 24% position in the insurer. Posco has already signaled its intention to sell the stake, which was previously a prime target for its main rival in the takeover contest, Lotte Group. Posco has reportedly given the funds its blessing to evaluate a deal. Other strategic contenders could include the Hanwha and Samsung chaebol.
Daewoo International’s Kyobo Life stake was previously the subject of a planned auction as far back as mid-2003, when the Korea Asset Management Corp. (KAMCO) floated the proposal. That event reportedly derailed an approach by Goldman Sachs to acquire the asset, as it dealt with legacy assets from the bankruptcy of the Daewoo chaebol in 1999.
However, nothing came of that process. Korea has accumulated a fair number of ostensibly attractive - yet problem - assets periodically held out to foreign investors, with Samsung Life Insurance, which linked with Kohlberg Kravis Roberts & Co. in 2005, being another example.
The deal may be particularly attractive because Korea has not recently been a major focus for regional insurance players, which are concentrating their resources on the highest-profile growth markets as they grapple with new post-GFC regulatory limitations on their businesses. “India, China and Southeast Asia are the three big plays,” one insurance industry source tells AVCJ. Korea, however, is already the world’s eighth-largest insurance market and was recently forecast by to Simon Machell, Aviva’s CEO for Asia Pacific, to grow into the world’s fifth-largest market for life products within the next five years.
With the current attractiveness of financial services sector plays for private equity, and precedents such as Carlyle’s highly lucrative exit from China Pacific Life Insurance in December last year, analysts say that Kyobo Life may offer a chance to pick up a relatively uncontested asset at an attractive price, ahead of future growth.
Carlyle and Affinity declined to comment.
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