Shinhan Financial Group (055550.KS) is considering acquiring Lotte Insurance. With its gap behind KB Financial Group (105560.KS) stemming from the insurance business, Shinhan aims to buy Lotte Insurance to strengthen its non-banking competitiveness if the price is right.
Shinhan Financial has begun internal review work for the acquisition of Lotte Insurance, according to financial industry sources Tuesday.
"I understand that JKL Partners, a shareholder of Lotte Insurance, has lowered the sale price from the previous 2 trillion won to around 1 trillion won," said a financial industry official familiar with Shinhan's situation. "From Shinhan's perspective, they appear willing to acquire it as long as the price is reasonable."
Korea Investment Holdings has also entered the bidding for Lotte Insurance. Korea Investment submitted a letter of intent (LOI) and began a full-scale review.
The industry sees price as the biggest factor. The dominant view in financial circles is that bidders will offer an amount significantly below 1 trillion won, given that any acquirer of Lotte Insurance would need to additionally purchase remaining shares and that a capital increase would be required to improve management.
JKL holds a 77.04% stake in Lotte Insurance. To incorporate it as a wholly owned subsidiary, the acquirer would need to buy the remaining 22.96% stake from the market. "Hana and Woori Financial lack the capacity to acquire an insurer, while KB has a strong KB Insurance and has decided to inject 1 trillion won into its securities arm," a financial industry official said. "JKL would also find it difficult to exit if it cannot sell now, so price will be the biggest factor."
