MBK to buy ING's Korea life insurance unit

ING Group has agreed to sell its life insurance unit in South Korea to local private equity fund MBK Partners for Won1.84tn ($1.7bn), moving a step closer to divesting its Asian assets to pay back public debt.

The European Commission demanded that ING split its insurance and banking arms and divest non-European assets as a condition of the aid it received from the Dutch state during the 2008 financial crisis, which included €10bn in capital injections.

The bank has already divested most of the required assets, and is scheduled to finish repaying the state aid in 2015.

Jan Hommen, ING chief executive, called the sale to MBK "a major step in the divestment of our Asian insurance and investment management activities".

MBK said on Monday that it had raised most of the funding needed for the deal. It will finance about Won880bn through its third fund worth $2.6bn, which will close next month, while institutional investors including KB Financial Group, Woori Investment & Securities, and Hana Daetoo Securities have agreed to provide syndicated loans worth some Won800bn.

As part of the deal, ING will take an indirect stake of about 10 per cent in ING Life Korea for Won120bn as a financial investor, to ensure a smooth transition of the business to the private equity fund. Under the agreement, ING will provide MBK with advice and other technical support for a year and allow the private equity fund to use its brand for up to five years.

The deal is subject to regulatory approval. MBK said it does not expect any trouble in winning that approval in Korea.

It would be South Korea's largest-ever insurance transaction, eclipsing last year's purchase by a consortium led by private equity firm Affinity Equity of a 24 per cent stake in Kyobo Life Insurance for about $1bn.

ING investors have seen two previous suitors back out of buying the Korean arm. Exclusive talks with Tong Yang Life of Korea and a private equity partner this year collapsed when the bidders were not able to raise the money. In 2012, KB Financial Group walked away from an agreed $2.1bn deal after its board deemed the acquisition too risky.

ING still has to find a buyer for its Japanese business, which cost it €98m in net losses in the second quarter of this year.

ING Life Korea is the country's fifth-largest insurance company and its largest foreign life insurer with about 1.3m customers. MBK Partners is the largest private equity firm in South Korea with more than $8bn in capital under management.

Additional reporting by Paul J Davies in Hong Kong

© The Financial Times Limited 2013. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation