Woori Financial Group’s Tangled M&A Thread, Can Wootoo Securities Unravel It?[시장팀의 마켓워치]

A view of Woori Financial Group’s headquarters.

As activist fund KCGI was selected as the preferred bidder for the acquisition of Hanyang Securities, the securities industry is recalling the incident two years ago when Woori Financial Group attempted to acquire Hanyang Securities.

In 2014, Woori Financial Group, which was trying to reduce its size for privatization, sold Woori Investment & Securities (now NH Investment & Securities), which was like Altoran, to NH Financial Group. Woori Bank, which lost its leader in the capital market, had difficulty operating for a while. In 2019, Woori Bank was converted to Woori Financial Group, and Son Tae-seung, the former chairman of Woori Financial Group, declared that he would regain his former glory as a comprehensive financial group through aggressive mergers and acquisitions (M&A). Internally, there was talk that acquiring a securities company was the top priority.

However, securities firms were not readily available on the market, and only rumors of unclear origin were circulating in the securities industry that Woori Financial Group was planning to convert Woori Financial Group into a securities firm.

Then, the rumor started to spread that Hanyang Academy was trying to sell Hanyang Securities, and Woori Financial Group immediately started the acquisition process. At that time, Woori Financial Group made an acquisition plan to purchase some of the stocks held by Hanyang Academy and then purchase additional shares through a paid-in capital increase. Price negotiations were also in the final stages.

However, the acquisition of Hanyang Securities, which was expected to be smooth, hit a snag at the end of 2022. The Legoland incident, which shook the Korean financial market, broke out. The acquisition of Hanyang Securities was temporarily suspended. They promised to discuss it again after the market stabilized.

However, Woori Financial Group, which was in a hurry, ultimately decided to acquire Daol Investment, not Hanyang Securities. At the time, as the domestic real estate project financing (PF) defaults were increasing due to the Legoland incident and the sharp rise in interest rates, Daol Securities put Daol Investment up for quick sale to raise funds, and Woori Financial Group immediately snapped it up.

Woori Financial Group evaluated that the M&A was for strengthening the non-banking sector. However, the M&A industry pointed out that the synergy effect was not great. In particular, there was skepticism that from the perspective of a financial holding company, acquiring a securities company should come first in order to strengthen the non-banking sector. There was also a ‘high price controversy’ regarding the price. Woori Financial Group acquired a 52% stake in Daol Investment for 215 billion won, but at the time of the acquisition, Daol Investment’s net profit in 2022 was only 12.7 billion won.

There were also claims that Woori Financial Group hurriedly acquired Daol Investment due to the reappointment of former Chairman Son. They may have chosen Daol Investment, which could produce certain results within the term, over Hanyang Securities, which had high uncertainty. An IB official also said, “If you only consider the synergy effect of acquisition, it is true that securities firms are ahead of VCs.”

There are also rumors that Woori Financial Group’s M&A strategy has gone awry since it chose Daol Investment instead of Hanyang Securities. After acquiring Daol Investment, Woori Financial Group acquired Posco Securities at a low price, merged it with Woori Investment & Securities, and launched the new Woori Investment & Securities. Posco Securities is a securities company in name only, but it lacks manpower, infrastructure, and systems. It’s like starting from scratch.

In order to fill the gap, we are focusing on recruiting a large number of personnel and obtaining key licenses. Hanyang Securities, a rare target in the securities industry, has come back to the M&A market, but Woori Financial Group has lost a good opportunity as it has not been able to participate in the acquisition battle due to its hasty preparations for launch.

We will have to keep an eye on whether Woori Investment & Securities, which had many twists and turns before its launch, can be reborn as a strong securities company that can bring synergy to Woori Financial Group. Woori Financial Group is said to be increasing capital in the securities company by tens of trillions of won in the coming years, but ultimately, changing ‘concerns’ to ‘expectations’ will depend on Woori Financial Group’s actions.

Reporter Lee Dong-hoon [email protected]

2024-08-12 22:37:36