Woori Financial opposes the takeover of Lotte Insurance

Woori Financial Group Headquarters in Seoul / Yonhap

By Lee Kyung-min

Market watchers said on Friday that Woori Financial Group had decided not to pursue its acquisition of non-life insurer Lotte Insurance due to its high price tag.

The explanation for the widely expected development is that JKL Partners’ 77 percent stake in Lotte is unchanged at the acquisition price of 3 trillion won ($2.1 billion). The private equity firm said Lotte’s market capitalization of more than 1.1 trillion won in premiums justifies the high price. But Woori made it clear that 2 trillion won is his lower limit.

“We considered acquiring shares in Lotte Insurance to strengthen the group’s activities outside the banking sector, but have decided not to consider this,” the group said in online information documents filed with the Financial Supervisory Service.

Woori is expected to focus on acquiring Tongyang Life Insurance and ABL Life Insurance, the same filing said.

“We will disclose details of our efforts to acquire Tongyang Life and ABL Life in a month or as soon as the details are finalized.”

Many say Woori’s announcement on Wednesday to acquire Tongyang and ABL without reneging on the Lotte deal was a last-minute tactic to bolster price negotiations with JKL Partners.

Meanwhile, a failed deal would add significant value to the group, whose first-quarter net income was 824 billion won. About 92 percent of the total came from Woori Bank.

Lotte Insurance recorded a net income of 301.6 billion won last year, significantly higher than the net income of Woori’s capital, cards and mutual fund subsidiaries, which posted a net income of just 128.2 billion won.

The figures for Tongyang and ABL last year were limited to 270.6 trillion won and 79.9 trillion won, respectively.

“It all depends on the price,” the Woori official said. “No matter how attractive any entity is, an acquisition is out of the question if the price is not right.”