* Agreement brings to end ING's 17-month-old S.Korea sale
* Deal leaves ING with Japan insurance unit to sell
* MBK seeking 1 trln won loan to finance the bid
* ING will book 950 mln euros loss on the sale
By Joyce Lee and Denny Thomas
SEOUL/HONG KONG, Aug 26 ING Groep edged
closer to completing its year-and-a-half-old Asia divestment
plan after private equity firm MBK Partners agreed to buy its
South Korean insurance unit for total cash proceeds of 1.84
trillion won ($1.65 billion).
Under the agreement announced on Monday, the bailed-out
Dutch insurer will retain about a 10 percent stake in the South
Korean unit and allow MBK to use the ING brand for up to five
The sale of the South Korean unit will leave ING with its
Japan insurance unit left to sell, bringing it closer to
fulfilling its agreement with European regulators to offload
more than 50 percent of its Asian operations by the end of 2013.
Since its rescue in 2008, ING has dismantled its
once-fashionable banking and insurance model and announced
thousands of job cuts and other cost savings. ING has raised
about 23 billion euros ($31 billion) in total from divesting
insurance, investment management and other assets to repay state
ING will own a 120 billion won stake in the South Korean
unit, confirming an earlier Reuters story.
"I am convinced that with the support of MBK Partners, ING
Life Korea will continue to grow its customer offering and build
on its position as the fifth-largest insurance company in the
Korean market," Jan Hommen, CEO of ING Group, said in a
"Through its 10 percent stake, ING will be able to benefit
from that growth potential," he added.
The deal values ING Life Korea, the nation's biggest foreign
insurer, at 9.2 times fiscal year 2012 earnings and 0.73 times
book value as of March 31, 2013, the statement added. South
Korean life insurers on average trade at a price-to-book ratio
of 0.83, according to Thomson Reuters data.
But ING will take an after-tax loss of about 950 million
euros ($1.3 billion) to be booked in the third quarter of 2013.
The transaction is subject to regulatory approval and is
expected to close in the fourth quarter of 2013.
ING shares were down 0.2 percent in early trade, while the
benchmark Amsterdam index was flat.
LARGEST S.KOREA INSURANCE M&A
Established in 1987, ING Life Korea is South Korea's largest
foreign life insurer, with about 1.3 million customers, more
than 1,000 employees and approximately 6,800 tied agents.
MBK, which is seeking about $2.6 billion in a new private
equity fund, will fund the deal with a 1 trillion won syndicated
loan, Basis Point reported last week. It is the largest private
equity firm in South Korea, with more than $8 billion in capital
If completed, it will be South Korea's largest insurance M&A
deal, surpassing the $1 billion purchase of a 24 percent stake
in Kyobo Life Insurance Co last year by a consortium led by
private equity firm Affinity Equity.
MBK recently entered exclusive talks for the controlling
stake after the insurance unit attracted a total of four bids in
May, including from Tong Yang Life Insurance Co Ltd,
Hanwha Life Insurance Co Ltd and Kyobo Life
Insurance Co Ltd, sources previously told Reuters.
But the sale of the South Korean unit had never been a
smooth process. In December last year, KB Financial Group Inc
walked away from a $2.1 billion bid to buy the unit.
In June, a Tong Yang-Vogo Fund consortium also dropped out after
entering exclusive talks to buy the unit, South Korean media
ING's Japanese insurance unit stopped selling variable
annuities in 2009 and it was unclear when ING would reach an
agreement on its sale. The Japanese financial regulator is
reluctant to let a private equity firm own that business,
sources previously reported.
ING is also seeking buyers for its stake in Thailand TMB
Bank, Reuters previously reported.
Last year, ING sold its Hong Kong, Macau and Southeast Asian
insurance operations for a combined $3.87 billion in an auction
that generated strong bidding.
A spokesman for MBK declined to comment.
ING was advised by Goldman Sachs and J.P. Morgan
, while Barclays was the financial adviser to
MBK, sources told Reuters.