China’s Ping An International Financial Leasing is weighing an acquisition of Hyosung Capital, the financial services arm of Hyosung Group, in a move to push into the South Korean market.
Ping An International Financial Leasing, the wholly-owned subsidiary of China’s Ping An Insurance Group, is considering acquiring Hyosung Capital, sources familiar with the matter said on Wednesday. It has shown a great interest in Hyosung Capital and reportedly expressed its intention to bid for the Korean company.
Ping An Insurance Group, China’s largest private-sector insurer, had total assets of 8.22 trillion yuan at the end of last year, with consolidated revenue of 1.27 trillion yuan for 2019.
Ping An International Financial Leasing, with total assets of more than 254 billion yuan, is also one of China’s largest financial leasing companies specializing in auto loan financing and loans for small and mid-sized businesses. It has long wanted to expand its footprint to South Korea, expressing interest in the country’s financial services firms including Hyosung Capital.
Ping An International Financial Leasing recorded operating profit of 20.5 billion yuan and net income of 4.4 billion yuan for 2019. With free cash flow of 45 billion yuan, the company appears to have sufficient funds to acquire the company.
Ping An Insurance Group is not alone among foreign investors in expressing interest in Hyosung Capital. Some industry players from Japan and Australia, which have their offices in the country, have also showed continued interest in expanding their business reach in Korea, industry watchers said. Among them, two companies headquartered in Australia have reportedly been tapping domestic accounting firms already to hire a financial advisor for the acquisition.
“Some strategic investors headquartered in Japan and Australia as well as China’s Ping An International Financial Leasing received documents about Hyosung Capital in preparation for bidding for the company,” an industry insider said.
High interest from foreign investors could be seen as a positive sign for Hyosung Group, as this could lead to a higher price tag for its financial services arm, with domestic private equity firms also moving fast to team up with local financial conglomerates to join the bidding for the company.
Hyosung Group has reportedly been approached by several foreign potential buyers, including Ping An International Financial Leasing, since the middle of last year. After receiving much interest from foreign strategic investors, the conglomerate hired the New York-based M&A advisory firm BDA Partners and the law firm Lee & Ko – both of which have significant experience in advising on cross-border deals – to lead the sale process.
Hyosung Group should complete the sale of Hyosung Capital by the end of December to comply with the local regulation that forbids a non-financial holding company from owning a stake in a financial services company. The conglomerate is seeking to sell the company for about 416 billion won, which represents a price-to-book ratio of one, or more. The first round of bidding for the company will take place as early as the end of June. (By reporter Choi Ik-hwan)