DB Group eyes Hanyang Securities amid KCGI deal uncertainty

DB Group, which owns DB Securities Co. and DB Insurance Co., is considering acquiring Hanyang Securities Co., as a deal by South Korean private equity firm KCGI to take control of the small domestic brokerage firm appears close to collapse.

DB Securities, led by Vice Chairman Koh Won-jong, has recently begun reviewing the potential purchase of a controlling stake in Hanyang Securities amid growing uncertainty surrounding the KCGI transaction, according to industry sources on Wednesday.

Last September, KCGI, better known as an activist fund, agreed to buy a 29.59% stake in Hanyang Securities for 220.3 billion won ($160 million) from the Hanyang University Foundation and its affiliated parties. 

However, the outlook for the deal closing has dimmed since the National Tax Service launched a special investigation into KCGI in March, said the sources.

It is said that DB Group is in contact with the Hanyang University Foundation in preparation for the possible collapse of KCGI’s acquisition of the brokerage house.

Gaining control of Hanyang Securities would offer DB Group new growth momentum in the brokerage sector, where its earnings have remained stagnant.

DB Securities could scale up through mergers with Hanyang Securities and Daol Investment & Securities Co., a mid-sized domestic brokerage firm.

Last month, DB Insurance Co., a non-life insurance company, became Daol Investment & Securities Co.'s second-largest shareholder after purchasing a 9.73% stake in the latter.

The 23.1 billion-won stake purchase stoked speculation that DB Group could launch a hostile takeover bid for Daol Investment.

It bought the shares from the latter’s No. 2 shareholder, Kim Ki-soo, head of Presto Investment Advisory. Kim has been in a management dispute with Daol Investment & Securities Chairman Lee Byung Chul.

Hanyang Securities is a specialist in fixed income trading, with annual operating profit projected to reach around 100 billion won. In the first quarter of this year, its operating profit soared 50% to 29.4 billion won from the year prior.

“DB Group has sufficient capital for M&As as DB Insurance has been earning profits in the 2 trillion won range annually,” said a brokerage industry official. “It could emerge as a big player in the brokerage sector’s M&A market.”

Hanyang Securities' share price has fallen 8% since KCGI announced the acquisition in September last year. The stock has rebounded in recent months, however, gaining 30% since the start of this year.

Write to Han-Shin Park and Jong-Kwan Park at phs@hankyung.com
 


Yeonhee Kim edited this article.