KB, Mirae Asset compete to take over No. 2 brokerage

The country’s largest brokerage M&A deal of the year will kick off this week, with the two most competitive bidders being KB Financial Group and Mirae Asset Securities.

On Thursday, the state-run Korea Development Bank will post a public notice on selling its 43 percent stake in KDB Daewoo Securities, the country’s second-largest brokerage by equity capital.

KDB Daewoo’s equity capital amounts to about 4.3 trillion won ($3.7 billion). This is second only to NH Investment and Securities, with 4.5 trillion won.

KDB Daewoo has a total of 103 branches nationwide, and is strong in investment banking and brokerage trading.

“A (brokerage) deal of this size is not only a rarity but it can also drive more investors to the M&A market for smaller deals later on,” an analyst of a major asset management firm said, asking not to be named.

Market observers picked KB Financial and Mirae Asset as the two goliaths of the deal, followed by some local financial firms, including Korea Investment Holdings Co. and Shinhan Investment Corp. Further, Zhongxin Securities Co., a brokerage subsidiary of China’s state-run Citic Group, is also expected to chip in for the deal.

The low-interest tide has made the KDB Daewoo deal more attractive for financial firms, as the long-stalled record-low interest rate has dwarfed their banking margins.

According to a recent report by financial research and consulting firm FnGuide, the country’s four major financial groups including KB Financial are expected to see a 6 percent drop in the net profit in the third quarter.

With the mega acquisition deal, the two giant financial groups aim to strengthen their nonbanking business portfolios. Both KB Financial and Mirae Asset have brokerage units ― KB Investment and Securities and Mirae Asset Securities, respectively.

Earlier this year, KB Financial revamped its insurance unit by acquiring a 19.47 percent stake in LIG Insurance for 645 billion won.

Mirae Asset was also open about its interest in the deal. In early September, its brokerage unit held a board meeting to vote on issuing more shares to raise 1.2 trillion won ($1.4 billion).

“It is high time that Mirae Asset Securities increased its capital to set out as a world-class financial company,” Mirae Asset Securities said in a press release shortly after the meeting, noting the strong possibility of an aggressive M&A of a nonbanking business.

By Chung Joo-won (joowonc@heraldcorp.com)