Chairman Park Hyun-joo of Mirae Asset Group.

When Mirae Asset Daewoo and Mirae Asset Securities are merged in November, their total combined capital is projected to be 1 trillion won more than had been projected earlier in the year. 

Financial authorities said on Aug. 2 that the two securities firms submitted papers to prepare for the merger in November, which showed that their combined capital 6.7 trillion won will be 1 trillion won more than the combined capital that was projected when Mirae Asset Securities was named as the priority bidder for a 43 percent of the shares held by the government in Daewoo Securities in March. 

The combined capital of the two securities firms had been projected to be 5.4 trillion won to 5.6 trillion won at the time. 

The capital of Mirae Asset Securities was estimated to be 3.455 trillion won, while that of Daewoo Securities was reported to be around 4.339 trillion won. The 2.320 trillion won that Mirae Asset Securities paid for the 43 percent stake in Daewoo Securities was subtracted from the combined capital of the two securities firms to arrive at an estimated combined post-merger capital.

However, a detailed financial analysis by Samil Accounting came to a different conclusion. Mirae Asset Daewoo Securities is entitled to 2.32 trillion won worth of its own shares after the merger based on Korea’s tax laws, but the accounting laws don’t recognize the entitlement. The newly merged firm’s capital is to be boosted to at least 7 trillion if the company does not pay dividends on its earnings to boost its capital to around 8 trillion won. 

Mirae Asset Daewoo earned 4,081 billion won in operating profit last year on a consolidated basis, while Mirae Asset Securities’ operating profit came to 1,485 billion won, also on a consolidated basis.

Mirae Asset Daewoo plans to secure its position as the largest investment banking entity in the country, with its capital exceeding 8 trillion won. Chairman Park Hyun-joo said when Mirae Asset Group was named as the priority bidder for Daewoo Securities last December that the capital of the newly merged securities firm would be boosted to around 10 trillion won by 2020. By law, securities firms’ with more than 4 trillion won in capital are allowed to issue promissory notes to boost their capital.

Officials of Mirae Asset Daewoo said boosting the capital to around 10 trillion won would not be hard for their company it can engage in real estate trust management and IMA when its capital grows to more than 8 trillion won. They can also  sell the company’s holdings to raise its capital.

The merged entity would create the country’s biggest brokerage by assets.

Korea Development Bank chose Mirae Asset Securities Co. and Mirae Asset Global Investments Co. as the favored purchasers of a 43 percent stake in Daewoo Securities and 100 percent of a small asset management firm, the state-owned bank said in an e-mailed statement. 

The statement didn’t put a value on the bid, though Korea Economic Daily-reported on Tuesday that Mirae offered 2.4 trillion won ($2.05 billion).

“We will combine the strong points of Mirae Asset and Daewoo Securities to develop into a global investment bank that represents Asia,” Park Hyeon-joo, chairman and founder of Mirae Asset,” said in a statement from Mirae Asset Securities Co.

The combined assets of Mirae Asset Securities and Daewoo are about 61.9 trillion won, exceeding the 41.7 trillion won of assets held by the country’s biggest brokerage, NH Investment & Securities Co., according to data from the Korea Financial Investment Association.

The 43 percent stake in Daewoo Securities is worth 1.43 trillion won, based on the brokerage’s closing share price of 10,200 won on Thursday. KDB Asset Management Co., the asset management firm, had a book value of 65 billion won as of Sept. 30.

A view of the building in Seoul where Mirae Asset Group has offices.(Photos: Mirae Asset)