Global investment firm The Carlyle Group will inject 240 billion won ($198 million) into KB Financial Group as part of a strategic alliance that marks its return to South Korean financial markets after several years of apparent inactivity.
The Washington-based giant, which has $195 billion of assets, said on Thursday (June 18) that it had signed a memorandum of understanding for the alliance between its regional buyout fund Carlyle Asia Partners V and KB Financial Group. It said the two firms will work together to create new investment opportunities, but gave no information on possible targets.
Carlyle’s investment in KB Financial Group will be via an exchangeable bond utilizing the Seoul-based firm’s treasury shares through the Carlyle Asia Partners V fund, which closed in 2018 at $6.55 billion.
Industry watchers said the deal showed that Carlyle put a high value on the fundamentals and outlook of Korean banks and had strong trust in KB Financial Group’s prospects.
“Carlyle seems to think highly of KB Financial Group’s position in the local banking industry and its ability to manage crises,” one analyst noted.
It is the second time Carlyle has invested in the South Korean financial sector. In 2000 the company acquired KorAm Bank, generating a profit of 700 billion won in three years when it later resold the bank to Citi Group.
Other global firms have also bought stakes. Investment firm KKR signed an MOU with Shinhan Financial Group in September 2018 which included the creation of a joint fund and equity investment. Shinhan Financial Group invested 200 billion won in KKR’s global fund earlier this year, underscoring the solid partnership between the two firms.
JB Financial Holdings has also been a target before. In 2015 Anchor Equity Partners, a private equity firm specializing in middle-market and consolidation investments, became a major shareholder of the firm through a rights issues. Sang-gyun Ann, CEO of Anchor Equity Partners, subsequently joined JB Financial Group’s board of directors.
Carlyle was the first major global PE firm to establish a presence in the Korean market, but has had a low profile in recent years. In 2014 the firm bought ADT Caps, South Korea’s biggest security services provider, for $1.93 billion from U.S.-based Tyco International, committing 800 billion won of its own money. Carlyle sold ADT Caps to SK Telecom for 934.9 billion won four years later, pocketing a return of more than 100 percent on the investment.
The KB Financial deal is the first since John Kim took over as managing director of Carlyle’s Asia Buyout Team in March and market insiders will be watching to see whether it leads to an active collaboration. Kim is giving little away.
“Carlyle will continue to strengthen its position in Korea,” he said. “We look forward to working closely with KB Financial in the process.”
As of March 31, Carlyle had reportedly made PE investments exceeding $21.5 billion across 235 deals in the Asia-Pacific region and had more than 20 investments in South Korea with combined assets of about $1.75 billion. (Reporting by Heeyeon Han)