[Market Now] KB, Korea Investment in takeover battle over Hyundai Securities

The race to take over Hyundai Securities will come down to two Korean financial holdings giants – KB Financial Group and Korea Investment Holdings – bidding for cash-strapped Hyundai Group’s brokerage.

After their shareholders meeting on Friday, chief executives of KB Financial and Korea Investment expressed their determined intent to acquire Hyundai Securities’ 22 percent stake owned by Hyundai Merchant Marine.

“We have submited an appropriate bidding price for the brokerage,” Yoon Jong-kyoo, chairman & CEO of KB Financial Group, told reporters after the shareholders meeting in Seoul.

This is KB Financial’s third attempt to buy a brokerage after failing to bid for Woori Investment & Securities and Daewoo Securities.

Korea Investment Holdings also expressed its strong will to acquire Hyundai Securities as part of its efforts to become a global financial company.

“The acquisition of Hyundai Securities will spur Korea Investment to compete alongside with Nomura Securities and China’s global investment banks worldwide,” said Kim Nam-goo, CEO of Korea Investment Holdings, to reporters. Kim is the majority shareholder of Korea Investment Holdings, with a 20 percent stake.

Korea Investment Holdings has Korea Investment & Securities, while KB Financial has KB Investment & Securities.

However, the two financial companies must bid higher than Hyundai Elevator, which has the right to acquire its affiliate Hyundai Merchant Marine’s 22 percent stake in Hyundai Securities. Hyundai Elevator is the biggest shareholder of HMM with a 19.5 percent stake, according to its regulatory filing. HMM has put Hyundai Securities on sale as part of its debt restructuring.

Other bidders include private equity funds such as LK Investment Partners and Pine Street. But news reports citing investment banking sources say that private equity funds are unlikely to bid given the financial burden that they will have to guarantee 30 billion won ($26 million) in deposit plus acquisition costs for Hyundai Securities. Only KB and Korea Investment have the capital to finance the acquisition, they said.

Hyundai Securities’ sales manager Ernst & Young is expected to disclose Hyundai Elevator’s bid price early next week, then compare it with other bids to select a preferred bidder. The sale of the brokerage will be finalized by the end of May.

(hkp@heraldcorp.com)