President Chun Byong-jo of KB Securities.

KB Securities Co. will strengthen its PEF operation in the new year by setting up a fund and establishing a team to take charge of its operation.

According to IB sources, the securities firm may consider setting up a PEF as large as as 300 billion won to boost its financial structure and control structural reform.

In this case, investors would be invited to make contributions to the fund after the investment target firm has been chosen. This type of fund is a lot easier to set up than a “blind fund,” which is formed before the investment target firm is chosen. 

KB Securities will do its best this year to shore up its PEF operation, which has been a weak point as its PEF investment record is not up to par with that of its rivals.

The company also plans to set up the funds needed for IPOs operated between bonds and securities with support of other KB Financial affiliates operating in a widely diverse financial market. The company is likely to focus its investments on a number of areas that it is familiar with, including new and recycled energy and the wood pellet business and the projects for waste treatment facilities. Wood pellets are a raw material for new energy.

The company narrowed down a list of the candidates to head the PEF team to two. After choosing the nominee, the company will select from eight to 10 staff to work for the new team.

The PE unit of KB Securities, which is being placed under the IB Solution Headquarters (led by Manager Park Cheon-soo), will continue to be operated under the present set up, with the operation of the buy-out fund slated to be launched from next year. In the early stages, the fund will be operated like other PEFs in the form of GP in order to build up its performance records.

KB Financial Group announced last June 1 that it had completed the 1.25 trillion won ($1.05 billion) purchase of Hyundai Securities, making it KB Financial Group’s 13th subsidiary on May 31.

With the latest takeover, KB Financial plans to establish a three-pillared system of commercial banking, securities and insurance, and focus on wealth management and corporate and investment banking services.

KB Financial Group's decision to swap stocks with Hyundai Securities to merge with the latter was “win-win,” as the stock prices of both companies are already picking up steam.

The group on Aug. 2 held a board meeting and decided to swap stocks with Hyundai Securities and buy back the group's own stocks worth 500 billion won ($444 million). During the meeting, the board set the swap rate at 1:0.1907312 after calculating the weighted arithmetic mean of the end price of one month, one week and recent sessions from Aug. 1.

This is a bid to make Hyundai Securities a KB affiliate and merge with KB Investment & Securities. In March 2016, KB Financial Group became the major shareholder of Hyundai Securities after purchasing 53.38 million Hyundai Securities shares from Hyundai Merchant Marine and other shareholders.

The board's decision raised the prices of both KB Financial Group and Hyundai Securities. A few months later, the group's stocks were at about 35,200 won per share on Aug. 2 and rose by 6.11 percent to 37,350 won on Aug. 5. Hyundai's stocks also improved from 6,730 won on Aug. 2 to 7,070 won on the same day, up 5.05 percent.

Initially, market observers anticipated that the group would buy Hyundai stakes after merging Hyundai and KB Investment & Securities. This was deemed unfavorable for Hyundai Securities' minor shareholders because Hyundai Securities is a listed firm, while KB Securities is not.

A view of the building in Seoul where KB Securities has offices.(Photos: KB Securities)