April 18, 2024

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Woori Financial Group and NongHyup Financial Group may end up vying to acquire Kukje Trust as both are looking to add a property asset trust arm. 

Woori Financial Group Chairman Sohn Tae-seung (left) and NongHyup Financial Group Chairman Kim Gwang-soo

Woori, which reintroduced a holding company structure this year, has officially acknowledged that it is hoping to snap up a majority stake in Kukje as a part of its plans to become a major commercial banking group in South Korea.

Now, community credit cooperative-led NongHyup has emerged as another potential contender. Speculation began to mount after it failed to renew its license to operate a property asset trust company. Earlier this month, Korea’s financial regulator granted preliminary licenses to Shinyoung Asset Trust, Korea Investment and Securities Real Estate Trust and Daishin Asset Trust. These were three out of 12 applicants including NongHyup’s asset trust arm.

So far, NongHyup Financial is denying the rumors.

If it does take part, it could trigger a higher valuation of Kukje. Its shareholders are reportedly in talks with Woori to sell a majority stake -- 50 percent plus a share -- for roughly 110 billion won ($97.26 million). Woori had earlier submitted bids to take over nonbanking firms such as Hi Asset Management, Tongyang Asset Management and ABL Global Asset Management.

Majority stake in Kukje is owned by Yoo Jae-eun, with Woori being a shareholder with a 6.54 percent stake. This is in contrast to other trust firms like Asia Trust, Hana Asset Trust and KB Real Estate Trust, which are under the umbrella of banking groups in Korea.

Kukje operates asset trusts like real estate investment trusts. It is the ninth largest of 11 Korean real estate trusts by assets under management.

It is virtually the only real estate trust in Korea facing sale after others withdrew. Saeng Bo Estate Trust, established through a joint investment by Samsung Life Insurance and Kyobo Life Insurance, is said to be facing opposition by the latter. Last year, Jinwon Engineering & Consulting stopped short of taking over Saeng Bo. Mugunghwa is now eyeing an initial public offering.

Real estate asset trusts are considered as key for a financial group’s growth of nonbanking business. The combined net profit of 11 domestic real estate asset trusts rose 28.3 percent on-year in 2017 and jumped over fourfold in four years, according to data by the Financial Supervisory Service.

By Son Ji-hyoung (consnow@heraldcorp.com)