SEOUL KB Financial Group Inc (105560.KS) decided against buying ING Groep NV's (ING.AS) South Korean insurance unit after mulling over the deal for months, dealing a setback to the Dutch group's Asia divestment plans.
The board of KB rejected at a meeting on Tuesday what would have been a roughly $2.1 billion acquisition.
"KB Financial's board of directors decided not to pursue the acquisition of ING's South Korean insurance unit as <the board> decided it is more important than ever to maintain a high capital adequacy level... as conditions for the financial sector continue to deteriorate due to next year's unclear economic outlook," the South Korean company said in a statement.
KB, considered a frontrunner to buy the ING unit, had already cut the negotiated price for the unit to around $2.05 billion, sources previously told Reuters.
But KB's board postponed a final decision on the deal earlier this month when several independent board members maintained the price was still too high.
In Tuesday's voting on the deal, five directors gave the go-ahead but five rejected it and two abstained, a source with direct knowledge of the deal told Reuters.
KB and an ING spokeswoman declined to comment.
The sale of the South Korean unit is part of ING's wider Asia divestment program to repay its 10 billion euro state bailout received during the global financial crisis.
ING has announced two deals worth $3.87 billion -- to sell its Hong Kong and Southeast Asian operations -- since launching the auction nine months ago. It has, however, struggled to find buyers for the much larger Japan and South Korea units.
But the pressure on the Dutch group to quickly divest the remainder of its Asia business has eased after it last month won more time from European Union regulators to repay the state assistance.
(Editing by Muralikumar Anantharaman)