Woori Financial joins bid for Lotte Insurance

Lotte Insurance headquarters in central Seoul / Courtesy of Lotte Insurance

Main bidding to take place as early as June

By Anna J. Park

Woori Financial Group has jumped into the bidding competition to acquire Lotte Insurance, industry sources said Thursday. Woori Financial is the only major domestic financial group that does not have an insurance affiliate, and the group has long outwardly spoken about its intention to strengthen its non-banking business through acquisitions.

According to the investment banking industry, Woori Financial Group as well as multiple global private equity firms (PEFs) joined the bidding process by submitting their letters of intent (LOI) earlier this week to J.P. Morgan, the lead manager for the sale of Lotte Insurance. BlackRock, Blackstone and Kohlberg Kravis Roberts (KKR) are said to be the PEFs that joined the competing process.

The subject of the stake is a 77 percent stake in Lotte Insurance, which includes management rights, currently held by JKL Partners.

It is expected that the prospective buyers will be able to conduct due diligence as early as next week. Main bidding is anticipated to take place around June.

JKL Partners acquired a 53.49 percent stake in the non-life insurance affiliate of Lotte Group in June 2019 at a price of 373.4 billion won ($271 million). The PEF increased its stake to 77.04 percent by October of the same year, injecting additional capital. The total amount invested by JKL Partners is approximately 729.6 billion won.

Given that the current market capitalization of the non-life insurer in the Korean stock market is around 1.15 trillion won, as of Thursday, the entire corporate value of the insurer, including the management premium, is estimated to be worth around 1.5 trillion won to 2 trillion won.

JKL Partners is said to be hoping for a sale price of over 2 trillion won for the deal. Although there seems to be some discrepancy between the price desired by the seller and the one estimated by the market, JKL Partners is expected to gain a considerable return through the sale after five years of investment.

Lotte Insurance set a record high in its earnings last year. The insurer posted an operating profit of 396.3 billion won and a net profit of 301.6 billion won, with its net assets standing at over 1.27 trillion won as of the end of last year.

While JKL Partners aims to complete the sale process by the end of this year, Woori Financial Group said it will be prudent in order to avoid overpaying for the acquisition.

“Woori Financial submitted a letter of intent to closely look into the acquisition deal for portfolio diversification. After conducting due diligence on the non-life insurance firm, the group will thoroughly examine whether the price meets our standards and will not overpay beyond a reasonable price,” an official from Woori Financial Group said.

Woori Financial Holdings has been strengthening its non-banking portfolio, including its recent purchase of Korea Foss Securities, an online-exclusive brokerage company.