A move by KB Financial Group to acquire a local insurer has reached an impasse despite a recent long-awaited approval from the financial regulator, industry sources said Friday.
In June, South Korea’s second-largest banking group preliminarily agreed to buy a 19.47 percent stake in LIG Insurance Co., the country’s fourth-largest insurer, for 685 billion won ($632 million). Last month, the Financial Services Commission, the country’s financial regulator, gave its nod to the deal, paving the way for KB Financial to beef up its non-banking business.
But KB Financial, after performing due diligence on the insurer, found that LIG’s 2014 net profit plunged to an estimated 137 billion won from 257.8 billion won measured seven months earlier.
The company has asked LIG to reduce the price by at least 10 percent, citing the worse-than-expected business results, but the insurer rejected it.
“It’s true that KB Financial has requested a discount,” said an official from LIG, asking not to be named due to the sensitivity of the issue. “But we cannot change the legitimate agreement now.”
Separately, KB Financial needs to further jack up its stake in LIG in order to put the insurer under its wing in accordance with local regulations, which could cost an additional 400 billion won.
Under the current laws, a holding company is required to own 30 percent or more of a company in order to have it under its wing as an affiliated firm.
Buying LIG has been one of KB Financial’s most sought-after projects in a bid to strengthen its non-life insurance business.
KB Financial Chairman Yoon Jong-kyoo, who took office in November, made an all-out effort to complete the deal by complying with all requirements from the regulator. The FSC had demanded that KB Financial come up with a detailed reform plan, including the resignations of some outside directors to prevent another internal power struggle among leaders that had forced chiefs of the holding firm and mainstay banking unit to step down.
Shares of KB Financial ended at 37,450 won on the Seoul bourse on Friday, unchanged from the previous session. The benchmark KOSPI jumped 0.79 percent. (Yonhap)
