Netherlands-based ING Groep NV (ING - Snapshot Report) is set to vend 90% stake of its South Korean insurance arm to private equity firm MBK Partners. The deal, which is subject to regulatory approval, is estimated to be worth approximately $1.5 billion.
ING Groep and MBK Partners are yet to ink the agreement. However, on completion, the deal will give MBK Partners the authority to use ING Groep’s brand name for the next three years.
Additionally, it will be the largest insurance agreement in South Korea, beating the $1 billion purchase of 24% stake in Kyobo Life Insurance Co. last year by an association led by private equity firm Affinity Equity.
In compliance with European regulators, ING Groep was seeking to offload more than half of its Asian assets, including the Japanese, Hong Kong and Thai insurance units by the end of this year. With the successful agreement to vend off the South Korean business, ING Groep is close to fulfilling the regulators’ criteria and has only its Japanese insurance arm left for divestiture.
ING Groep is aiming at divesting its Asian assets, especially its insurance and investment-management businesses, by the end of 2013. This is mainly for the repayment of $13 billion state financial aid, which the company received from the Dutch government during the financial crisis of 2008. The company also plans to vend its banking assets to accelerate repayment of the remaining amount of roughly $3.9 billion with premiums.
The sale of the South Korean insurance operations will be one of the major deals in line with the company’s plan to divest its Asian assets. In Oct 2012, it had announced a deal to vend its lucrative Malaysian insurance business to Asian insurance giant AIA Group Ltd. for approximately $1.7 billion.
Apart from this, ING Groep announced the divestiture of its insurance business, pension and financial planning divisions in Hong Kong and Macau, as well as its life insurance operations in Thailand to Pacific Century Group for a total of $2.14 billion in cash.
In the same month, the company had announced a deal to sell its entire stake in China Merchants Fund (CMF) to the joint venture partners of the fund, namely China Merchants Bank and China Merchants Securities Co. Ltd. In Nov 2012, ING Groep announced the sale of its lucrative Thailand Asset management business to Singapore’s United Overseas Bank Ltd.
Other Global Divestments
Apart from selling its Asian businesses, ING Groep has offloaded a couple of its other global businesses in the past year to streamline operations and focus more on core banking activities. Last week, it agreed to sell ING Direct UK – its British online banking division – to U.K. banking giant Barclays PLC (BCS - Analyst Report).
In Aug 2012, ING Groep announced the sale of ING Direct Canada – the Internet banking division of ING Bank of Canada – to The Bank of Nova Scotia (BNS - Snapshot Report). Further, in Feb 2012, it completed the sale of its online banking unit, ING Direct USA, to Capital One Financial Corp. (COF - Analyst Report).
We believe that the closure of such deals will help ING Groep to repay the bailout funds to the government. Further, it will help the company to pay more attention to its core businesses amid a bleak macroeconomic environment.
ING Groep currently carries a Zacks Rank #3 (Hold).