JKL ends its long-term investment in Lotte Insurance, selling controlling stake to Shinhan Financial Group [fn Market Watch]

[Financial News] Shinhan Financial Group is acquiring Lotte Insurance. The deal follows an agreement with private equity fund (PEF) manager JKL Partners, which had held firm to an enterprise value (EV) of KRW 1 trillion or more. For Shinhan Financial, this will mark an insurance company M&A following its acquisition of BNP Paribas Cardif General Insurance (now Shinhan EZ General Insurance) in 2022.
According to the investment banking (IB) industry and the Financial Supervisory Service’s electronic disclosure system on the 13th, the board of Shinhan Financial Group Holdings met that morning and approved the proposed acquisition of Lotte Insurance. The seller’s side also decided to proceed with the sale through a board meeting, it was confirmed. The two sides signed a stock purchase agreement (SPA) that day. Under the deal, Bigtura LLC, managed by JKL Partners, will sell 239,082,287 common shares in Lotte Insurance—approximately 77.04% of its total issued shares—to Shinhan Financial Group Co., Ltd. for KRW 693,338,632,300.
JKL Partners acquired a 53% stake and control of Lotte Insurance from Lotte Group in 2019 for KRW 373.4 billion. It then invested approximately KRW 356.2 billion in a paid-in capital increase in October 2019, bringing its total investment to KRW 730 billion. It raised its ownership stake to 77.04%.
JKL Partners began pursuing a sale in 2023, appointing JPMorgan as its adviser, but the effort fell through. This year, it replaced the sale adviser with Samjong KPMG. It began full-scale negotiations with Shinhan Financial Group over price and terms, but talks were delayed by a gap in their price expectations.
Shinhan Financial Group Holdings has been building up its financial firepower to acquire Lotte Insurance. It is reported to have raised a total of KRW 800 billion by issuing hybrid securities worth KRW 400 billion each in March and September. In March, Lotte Insurance received a management improvement recommendation from the Financial Services Commission, corresponding to Level 2 of prompt corrective action. Shinhan Financial will face the burden of having to participate in a paid-in capital increase through a new share issuance to bolster the company’s capital.
Lotte Insurance was established in 1946 as Daehan Fire & Marine Insurance and listed on the stock exchange in 1971. After joining Lotte Group in 2008, it changed its name to Lotte Insurance. Shinhan Financial acquired Orange Life in 2019 and merged it with the existing Shinhan Life in 2021 to launch Shinhan Life, quickly growing its life insurance business into one of the industry’s top four.
Meanwhile, the IB industry views this deal as a case in which the insurance regulatory environment and the buyer’s additional capital burden were reflected in the sale price. In particular, given that Lotte Insurance received a management improvement recommendation from the Financial Services Commission in March, analysts say the scale of the capital injection required after the acquisition was a key factor in the deal.
A senior IB industry official noted, “An insurance company M&A is a transaction where you have to consider not only the acquisition price but also the capital that must be injected after the acquisition.” The official added, “From the seller’s perspective, it is possible that the decision to exit took into account the additional capital burden and the opportunity cost of holding the asset long term.”
[email protected] Kang Gu-gwi Reporter