April 20, 2024

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[THE INVESTOR] BNK Financial Group, MBK Partners and Hanwha Group are among candidates considering to acquire Lotte Group’s credit card and insurance units, according to industry sources on Dec. 4. 

BNK Financial Group, the holding firm of Korea’s regional lenders Busan Bank and Kyongnam Bank, is planning to review the possibility of buying Lotte Insurance and Lotte Card in a bid to boost its non-banking services.

Sources say local private equity fund MBK Partners is also contemplating to join the bid, following its successful deal of selling Orange Life, formerly ING Life Insurance, to Shinhan Financial Group, earning over 2 trillion won in returns. 

Among the local conglomerates, Hanwha Group is interested in the deal, in a move to expand the size of its financial affiliates -- Hanwha Life Insurance and Hanwha Investment & Securities. 

Lotte has picked Citigroup Global Markets Korea Securities to manage the deal, following the announcement to sell its two financial units last week. 

The retail giant hopes to sell the firms for a combined 2 trillion won (US$1.80 billion). But the buyers are estimating Lotte Card at 800 billion won to 1 trillion won and Lotte Insurance for around 500 billion won, according to market watchers. 

Korea’s fifth-largest conglomerate’s decision came as it seeks to speed up transition into a holding company structure. 

Last October, Lotte established its holding company Lotte Corp. in a move to get rid of the complex cross-shareholding structure. It is required to divest its stake in financial units within two years to comply with the local fair trade law that prohibits non-financial holding firms from owning shares in financial businesses or vice versa. 

Lotte Corp. owns 93.8 percent stake in Lotte Card and 25.64 percent in Lotte Capital, but has no direct shares in Lotte Insurance. Instead, Hotel Lotte owns a 23.68 percent in Lotte Insurance. However, considering the conglomerate’s plan to put the hotel giant under the holding firm, it has to sell its stakes. Lotte has to divest shares in Lotte Capital as well, but is planning to sell the credit card and insurance subsidiaries first.

By Ahn Sung-mi (sahn@heraldcorp.com)