|The Hanwha Life head office in Seoul / Yonhap|
Hanwha Life may form an alliance with local private equity fund MBK Partners to acquire Lotte Card, industry sources said, Monday.
The insurance arm of Hanwha Group displayed an interest in acquiring Lotte Card after Lotte Group announced a plan in late 2018 to sell its credit card subsidiary as part of restructuring itself into a holding company.
However, market observers questioned whether Hanwha Life had sufficient cash reserves to bid for Lotte Card.
They now say a Hanwha Life-MBK Partners alliance is the most likely scenario since the latter has also expressed its interest in acquiring the card company.
"I understand Hanwha Life officials visited MBK Partners recently to discuss a possible consortium for a Lotte Card bid," said an industry insider familiar with the issue.
"MBK Partners is reviewing the proposal but there is no hurry for the private equity fund because it has many other options. It will take as much time as it can to get the best deal."
The country's largest private equity fund became the talk of the town after selling its 59.15 percent stake in Orange Life Insurance, a former unit of Dutch insurance giant ING Group, to Shinhan Financial Group for 2.29 trillion won ($2.03 billion) in September.
This was the nation's biggest insurance takeover ― the life insurer reported 4.34 trillion won in revenue in 2017 and generated a net profit of 340 billion won.
The private equity firm had bought the insurer from ING Group for 1.84 trillion won in 2013. It sold part of its stake in the firm in an initial public offering in 2017.
"MBK Partners proved that it could generate value after acquiring a firm. Also, it is probably the only entity with enough cash reserves to conclude such a mega deal at this point," said a market analyst asking for anonymity.
"I don't know whether Hanwha visited MBK to form a possible consortium for Lotte Card, but the chance is very high."
A Hanwha Life official immediately denied the claims.
"I do not know where the rumor came from, but Hanwha Life officials didn't visit MBK Partners to discuss forming a consortium," the official told The Korea Times.
However, he didn't entirely eliminate the possibility of an alliance.
"As far as I know, nothing has been officially discussed with MBK Partners, but anything could happen in a takeover battle. It is currently only at the preliminary bidding phase."
According to Lotte Card, about 10 firms have expressed interest in Lotte Card, citing its years of strong earnings. These include Hana Financial Group.
Lotte Corp, the group's holding company which currently has a 93.8 percent stake in Lotte Card, said it will sell sufficient shares to give away management rights instead of disposing of its entire stake.
Sources said Lotte Group expects to get about 1.5 trillion won through the sale.
According to the Financial Supervisory Service, Lotte Card posted 1.58 trillion won in sales with 95.3 billion won in operating profit and a net profit of 70 billion won in the first nine months of 2018.