South Korea’s largest private equity (PE) firm MBK Partners is weighing whether to participate in a race for Prudential Life Insurance Company of Korea, while the main bid for the life insurer kicked off.
According to sources familiar with the matter, Goldman Sachs, the lead manager for sale of Prudential Life Insurance, has started receiving final offers from preliminary bidders on March 19. While most preliminary bidders, including KB Financial Group, Hahn & Company and IMM Private Equity, took part in the bid, MBK Partners reportedly has yet to decide whether to bet on the life insurer.
It is said that MBK Partners’ offer price was the highest among other bidders in the first round of the auction, but the PE firm still doesn’t show its hand in the final stage of the bid.
Investment banking (IB) industry sources say that as MBK Partners already showed its capability and will to acquire the life insurer in the preliminary bid, the PE firm is now taking a wait-and-see stance. Also, a strong relationship between MBK Partners and Prudential Life’s lead sale manager Goldman Sachs may enable the PE firm’s current relaxed position. Some view that Goldman Sachs have not set a deadline for the final bid and kept door open for possible negotiation over the price with each of the bidder, bearing in mind the PE firm’s stance.
Some even say that the sell-side might have designated MBK Partners as a stalking horse bidder during the preliminary bid and held the final bid to gauge other bidders’ offer prices. In a situation where other bidders’ offer prices have been shared to a certain degree, MBK Partners may be taking a wait-and-see stance until the last minute to act as a casting vote.
In the meanwhile, it is also said that the PE firm is hesitating to bet its money on Prudential Life amid heightened uncertainties due to the outbreak of the coronavirus. There is more room for downside than it was during the preliminary bid as many other issues have arisen that can drag the valuation of the life insurer down.
Especially when the Bank of Korea lowered its key rate drastically this month, potential buyers may take an advantage of this situation so that it is reflected in the Prudential Life’s valuation. Those bidders who already took part in the bid also are reportedly taking a more conservative stance compared to the early stage of the race.
MBK Partners, who has already proved its management skills and capital strength through its successful investment in Orange Life (formerly ING Life Insurance), can be more careful about the acquisition of Prudential Life to maintain its high reputation.(By Han Hee-yeon)