South Korea’s advisory firms are nimble to receive mandates to handle a possible sale process of the country’s savings banks while M&A activity is expected to increase as financial authorities look to ease restrictions on business combinations in the sector.
According to industry sources on March 17, advisory firms that have put efforts into M&A of financial firms have picked several particular savings banks that are likely to be put up for sale and kicked off preparation work to receive mandates to handle a sale process.
The nation’s savings banks have garnered much attention evenly from strategic investors and financial investors. M&A industry has paid attention to the savings bank sector as the country’s regulators don’t permit new firms to enter the sector.
In addition, with financial authorities looking to ease restrictions on M&A in the sector, likelihood of changing hands of potential targets seem to be rising. The Financial Supervisory Service (FSS), the country’s financial watchdog, has recently announced that it plans to alter existing regulations for savings banks to be in tune with a changing financial environment. The plan may include relaxing restrictions on business combinations between savings banks based in different geographic areas, and lifting prohibition on ownership of three savings banks or more by the same majority shareholder.
Under current rules, one that intends to be a majority shareholder of a savings bank has to receive an approval from the Financial Services Commission (FSC), but the approval isn’t necessary in the case of no change in significant shareholders. For example, a consortium composed of Liveplex and CTGen acquired equity in Taeil and its subsidiaries Han Il Distribution and Sambo Savings Bank to become a new owner of the savings bank in August 2019.
There are reportedly 17 savings banks that a majority stake is owned by corporate entities – except for financial holding companies and investment companies – including Dong Yang Savings Bank in Gwangju, South Jeolla Province, Anyang Savings Bank in Gyeonggi Province, and Incheon Savings Bank in Incheon Metropolitan City. Some savings banks with corporate entities as their majority shareholders have been looking for potential buyers for years but none of them have finished their sale process.
Insung Savings Bank may also be put up for sale. South Korea’s steel drum and asphalt company Insung is the majority shareholder with a 60.64 percent stake. Insung Savings Bank was established in 1975. M&A industry estimates the savings bank’s valuation at a little over 100 billion won, while an Insung Savings Bank official said that the firm isn’t pushing ahead with a sale process.
IB industry observers are expecting more concrete measures to be announced as early as next month. The authority is likely to entirely or partly lift restrictions that have limited M&A activity in the nation’s savings bank sector, they said. (By Rho Ar-rum)