ING announced yesterday (June 10) that it had reached an agreement to sell its investment management business in South Korea to Aussie-based Macquarie Group. The transaction is not expected to have a material impact on ING Group results. Subject to regulatory approvals, it is expected to close in the fourth quarter of 2013.
The transaction follows on from ING's previous announcement that it was planning to divest its insurance and investment management businesses. The process to divest the remaining insurance and investment management businesses in Asia, including ING Life Korea, is ongoing and any further announcements will be made if and when appropriate, the company said in statement. ING’s commercial banking activities in South Korea will not be affected.
Veteran industry expert on Korea, Hank Morris, provided Asia Asset Management with the following insight: “During the global financial crisis, the ING Group was in dire financial condition and needed to be bailed out by the Dutch government. The quid pro quo for the bailout was ING Group's agreement that it would sell its global insurance business to raise capital to repay the Dutch government for the bailout.
“ING has had a very successful insurance business in Korea as well as in other Asian markets. The ING Group's Korean insurance business is the major shareholder of ING Investment Management Korea, and this asset management company has been doing fund management for ING Life Korea under contract. ING Investment Management Korea does have other asset management clients, but I think that its major revenue source has been from the fund management activity that it has carried out on behalf of ING Life Korea.
“ING Life Korea was one of the insurance subsidiaries that ING Group was required to sell according to the group's agreement with the Dutch government and the EU financial regulators. But almost any potential buyer of ING Life Korea, such as a large Korean bank, would already have its own fund management subsidiary, and it would thus probably not want to buy ING Life Korea's asset management subsidiary, ING Investment Management Korea. So the logical thing would be for ING Life Korea to sell its fund management subsidiary to some other company that has an interest in the Korean asset management market.
“Macquarie does have a fund management company in Korea already, but it is a project finance specialist joint venture asset management company that it established with Shinhan Bank; the JV does not undertake general portfolio management. Macquarie also set up a portfolio management JV with a small Korean business group called Samchully; Macquarie Samchully Asset Management – my guess is that this company did not partake in general portfolio management but rather had a focus on natural resources-related asset management."
Macquarie did have an asset management JV that provided general portfolio management around 12 years ago, in which it was the majority partner in with a 70% stake - Macquarie IMM Asset Management Korea. It was this company, Macquarie IMM, that Goldman Sachs bought at the top of the market back at the end of 2007, and which became Goldman Sachs Asset Management Korea, the company that Goldman's closed down earlier this year.
“It seems Macquarie sensed that as this was perhaps a low point in the Korean asset management market, they could acquire ING Investment Management Company Korea for a rather low purchase price. Subsequently, when the Korean market recovers, they can reap the rewards of astute timing of their investment. My best guess is that the Macquarie side has negotiated an agreement whereby Macquarie will continue to provide asset management services to ING Life Korea for some years since the contractual asset management provided by ING Investment Management to ING Life has been a major part of the asset management company's revenue and Macquarie would want to have that protected for a period of years after the acquisition,” explained Mr. Morris.
ING’s investment management business in South Korea manages approximately 25 trillion won (US$22.12 billion) of assets as of March 31, 2013, primarily for local institutional clients including ING Life Korea.