More global private equity (PE) firms are exploring investment opportunities in the South Korean financial services sector as large firms in this category are considered undervalued relative to other countries.
Affinity Equity Partners and Baring Private Equity Asia (BPEA) are set to invest a combined 1.2 trillion won ($1 billion) – 600 billion won each – in Shinhan Financial Group by purchasing new shares in the South Korean company, sources said on September 3. The transaction amount represents a near 4% stake.
This is not the first strategic partnership between a global PE firm and a South Korean financial services conglomerate, although the deal is exceptionally large compared to others previously announced.
In June, US private equity firm The Carlyle Group invested 240 billion won in exchangeable bonds issued by KB Financial Group. Carlyle and KB Financial are said to be aiming to cooperate for new investment opportunities and synergies in the industry.
Anchor Equity Partners also participated in a 180 billion won private placement of shares in JB Financial Group along with other investors including Singaporean sovereign wealth fund GIC in 2015. Sanggyun Ahn, managing partner at Anchor Equity Partners, is serving as a board member of the company.
Among domestic PE firms, IMM Private Equity holds sizable stakes in Shinhan Financial and Woori Financial Group. But its purpose of ownership is to make financial gain rather than seeking synergies, industry watchers said.
Shinhan Financial has been actively collaborating with global PE firms. The company and US buyout firm KKR & Co announced a partnership in 2018 to jointly launch funds that invest in alternative assets. Shinhan Financial committed 200 billion won to one of the funds earlier this year.
Many of the global PE firms appear positive about investment opportunities in the South Korean financial services sector as the country’s financial markets have been relatively resilient despite increased economic uncertainty due to the Covid-19 crisis.
They seem to like the strong fundamentals of South Korean financial services companies that survived two financial crises in 1997 and 2008, industry watchers said, adding that more partnerships of this type are expected to follow because domestic financial services conglomerates are also looking for a strategic partnership with global PE firms as future growth drivers. (Reporting by Hee-yeon Han)