Heungkuk Life Insurance has threatened legal action after losing the bid for management control of Eijis Asset Management, claiming its bid price was leaked to competitor Hillhouse Investment.
According to investment banking sources on December 9, Morgan Stanley and Goldman Sachs, the lead advisors for the sale, contacted Hillhouse through direct and indirect channels after the November 11 main bidding deadline to ask whether the firm could raise its offer again. This practice, known as a "progressive deal," involves sellers encouraging bidders other than the highest bidder to increase their prices in competitive M&A transactions.
In a statement released the same day, Heungkuk Life said, "The sellers publicly stated before the main bidding that they would not conduct a progressive deal. However, they delayed announcing the preferred bidder, proposed a progressive deal to Hillhouse, and asked them to raise their offer above the highest bid in the main round."
The company added, "We received confirmation from the advisors that we had to submit our final price in the main bidding, and we submitted the highest bid at that time."
The sellers selected Hillhouse, which submitted a bid of 1.1 trillion won ($770 million), as the preferred bidder on December 8. However, industry sources indicate that Heungkuk Life had actually submitted the highest bid during the main bidding round. The advisors allegedly encouraged further competition behind the scenes to drive up prices, resulting in Hillhouse raising its offer and winning the bid.
Heungkuk Life used harsh language in its statement, calling the selection "a joint production by a China-based private equity fund targeting Korea's real estate platform and foreign advisors blinded by large performance fees."
The company described the situation as "an incident that has undermined the trust and order of our capital market" and emphasized that it "will make every effort, including legal action, to correct this wrong."
As controversy grows over the preferred bidder selection, attention is also focusing on whether a foreign private equity fund can acquire Korea's largest real estate asset manager. To acquire a Korean financial company, buyers must pass the Financial Services Commission's major shareholder eligibility review, which examines the source of acquisition funds and considers financial market stability and public interest.
Hillhouse is a global private equity fund founded by Zhang Lei, who is originally from Henan Province, China. Zhang majored in international finance at Renmin University of China, earned an MBA from Yale University, and built his success through investments in Chinese tech giants including Tencent and JD.com.
Some industry observers have noted Hillhouse's recent entry into Japan's real estate management business. Last year, Hillhouse acquired Samty Holdings, Japan's largest comprehensive real estate group, through its subsidiary Lava Partners. For the Eijis acquisition, Hillhouse positioned Samty as the acquiring entity, reportedly aiming to maximize real estate synergies between Korea and Japan.
"If Chinese capital takes control of real estate managers in both Korea and Japan, it will gain enormous influence across the entire East Asian market," an investment banking industry official said.
