UPDATE 1-Kyobo Life bids for ING's S.Korean insurance business

SEOUL/HONG KONG Fri May 24, 2013 7:39am EDT

SEOUL/HONG KONG May 24 (Reuters) - Kyobo Life Insurance, South Korea's third-largest insurer, said on Friday it had made a bid for a controlling stake in ING's South Korean insurance unit, breathing new life into a delayed deal previously valued at roughly $2 billion.

Kyobo, whose investors include Ontario Teachers' Pension Plan, Singapore sovereign fund GIC and private equity firm Affinity Equity Partners, is set to compete against the country's second-largest insurer Hanwha Life Insurance Co Ltd , which is expected to submit its own bid, according to a source with direct knowledge of the matter.

Further bids are also expected from private equity firm MBK Partners, and from Tong Yang Life Co Ltd backed by Seoul-based private equity Vogo Fund, separate sources with direct knowledge told Reuters.

The sources declined to be identified as the bidding process was private.

The deal is set to be one of the largest M&A deals in Asia's fourth-largest economy this year, although the final value depends on the size of the stake that ING sells.

ING is only required to sell more than 50 percent in the unit by 2013 and divest the remaining interest by the end of 2016, but wants to sell as much as possible, sources said.

The sale of a stake in its Korea insurance unit will bring ING Groep NV closer to fulfilling its agreement with European regulators to sell more than 50 percent of its Asian operations by the end of 2013.

KB Financial Group Inc had been lined up to buy the unit for roughly $2.1 billion last year, but dropped its bid.

After last year's sale fell through, seller ING has asked bidders to attach bank letters of credit to their bids as a way to guarantee financial backing, a buy-side source and a local bank executive in charge of corporate financing previously told Reuters.

ING Life Insurance Korea Ltd is the country's fifth-largest life insurer with 22.7 trillion won ($20.11 billion) in assets as of end-2012.

An ING Groep spokeswoman was unavailable for comment.

Officials at Hanwha Life, Tong Yang Life and MBK Partners declined comment or could not be reached.

Goldman Sachs and JP Morgan are advising ING on the sale. ($1 = 1128.5750 Korean won) (Reporting by Joyce Lee in SEOUL, Denny Thomas and Stephen Aldred in HONG KONG. Editing by Jane Merriman)