Hanwha Life and Centroid Invest wrap up financing for Acuon Group acquisition [fn Market Watch]

[Financial News] Hanwha Life and Centroid Investment Partners (Centroid PE) have effectively completed financing for their acquisition of the Acuon Group (Acuon Capital and Acuon Savings Bank). They have completed formation of a project fund worth approximately 150 billion won and received letters of commitment (LOCs) from all the acquisition-financing arrangers. Approval of the business combination filing is expected as early as November.
According to investment banking (IB) industry sources on the 8th, Hanwha Life and Centroid PE have completed preparations to form a project fund worth approximately 150 billion won for the acquisition of the Acuon Group. The acquisition-financing arrangers will fully underwrite the project fund's equity. Hanwha Life will hold about 51% of the fund, and Centroid PE about 49%. The acquisition-financing arrangers are Shinhan Financial Group (Shinhan Bank and Shinhan Investment & Securities), Woori Investment Securities and Meritz Securities. Several financial companies proposed arranging the financing, but Centroid PE selected three after weighing the terms. The interest rate is also understood to have been secured at a competitive level in the market. Industry sources estimate the acquisition financing at 200 billion to 300 billion won.
Centroid PE structured the financing to give financial companies that had committed to investing in the fund the first opportunity to arrange the acquisition financing. By combining the equity investment and loans, it reduced the risk of a funding shortfall. Given that terms for acquisition financing have tightened amid increased volatility in long-term interest rates, the pace is being viewed as fast.
Hanwha Life held a board meeting on the 30th of last month and signed a stock purchase agreement (SPA) to acquire EQT Partners' 96.06% stake in Acuon Capital. The total transaction price is around 870 billion won. Since Acuon Capital owns 100% of Acuon Savings Bank, the latter will become Hanwha Life's subsidiary's subsidiary. UBS, Citigroup and Shin & Kim advised EQT on the sale.
Capital-adequacy concerns played a role in Hanwha Life's decision to pursue a joint acquisition rather than acquire the company on its own. At the end of June, its K-ICS solvency ratio, after transitional measures, stood at 168%, the lowest among the four major life insurers. Centroid PE is understood to have secured a put option allowing it to sell its stake back to Hanwha Life after a certain period. Earlier this year, Hanwha Life bought a 15% stake in Centroid PE, becoming its second-largest shareholder. The two companies are also pursuing a joint acquisition of funeral services company The People Life. The remaining variable is regulatory approval. The business combination filing was recently submitted, but the timing of approval remains uncertain. The buyers are aiming to close the transaction by the end of the year.
Acuon is a non-bank financial platform focused on Acuon Capital and Acuon Savings Bank, spanning corporate finance, asset-based finance and retail finance. Acuon Capital has grown into South Korea's largest independent capital company, while Acuon Savings Bank ranks fifth among the country's savings banks by total loan assets. The two companies have combined assets of approximately 10 trillion won. However, their performance varies. Acuon Capital's consolidated net profit for the first half of this year rose 30.3% from the same period last year to 45.6 billion won. By contrast, Acuon Savings Bank's total loans fell by more than 11%, leaving it with first-half net profit of just 1.3 billion won. Credit rating agencies have placed Acuon Capital's credit rating on review for an upgrade, citing the increased likelihood of group support after it joins Hanwha Financial Group.
Acuon Capital was formerly KT Capital, and Acuon Savings Bank was formerly HK Savings Bank. In 2019, UK-based private equity firm Baring PEA acquired the two companies from JC Flowers for approximately 700 billion won. EQT Partners acquired Baring PEA in 2022.
An IB industry source said, “With both the equity and acquisition financing finalized, regulatory approval is effectively all that remains before the transaction can close,” adding, “After the acquisition, the recovery of the savings bank's profitability will determine the success of the deal.”
[email protected] Kang Gu-gwi Reporter