Korean bank earns 300 billion won by selling its stake in SK Holdings through block deal
Chairman Yoon Jong-kyoo of KB Financial Group, nominated for a third term.
KB Kookmin Bank completed the process of acquiring Bukopin Bank in Indonesia. Kookmin Bank said on Aug. 26 that it conducted a resolution at a shareholders’ meeting to buy a 67 percent stake in Bukopin Bank on Aug. 25.
Therefore, KB Kookmin Bank has become the largest shareholder of Indonesia’s Bukopin Bank. The bank planned to invest a total of 400 billion won from 2018 to 2020 to secure at least 51 percent of the bank’s equity in June.
Analysts say KB Kookmin Bank, which lagged in global business competition among Korean banks, made a decisive move in Indonesia amid the COVID-19 crisis.
In June, KB Kookmin Bank decided to participate in a shareholder allocation capital increase for Bukopin Bank. The capital increase amounted to $200 million at the time.
Board members and executives of KB Kookmin Bank and Bukopin Bank pose following Bukopin Bank’s shareholders’ meeting, which approved the Korean bank’s acquisition of the Indonesian bank in Jakarta on Aug. 25. (Photos: KB Financial Group)
A shareholder allocation paid-in capital increase means a company issues new shares and sells them to its shareholders for cash.
To that end, KB Kookmin Bank deposited $200 million for the first payment in its local escrow account in June.
An escrow account refers to an account that deposits payment amounts until certain conditions are met, such as the signing of a contract.
In June, the largest shareholder of the bank was the Bosowa Group (23.4 percent), which had subsidiaries in the cement, auto production and distribution industries. The Bosowa Group has been working with Hyundai Motor in the mid-sized truck sector since the 2000s.
The second-largest shareholder is KB Kookmin Bank (22 percent), which spent 116.4 billion won to participate in a capital increase at the end of June 2018.
Since then, KB Kookmin Bank had planned to become the largest shareholder. The strategy was to secure a stake of at least 51 percent, but that might rise depending on the price of the stock of Bukopin Bank.
As the entire Indonesian economy was hit by the COVID-19 crisis in 2020, the stock price of Bukopin Bank, which was 380 rupiah per share at the end of June 2018, also contracted to 189 rupiah (16 won) as of June 23.
The price of the new share would be lower than this, and the final amount of Kookmin’s investment would also vary depending on how much lower the purchase price will be.
KB Kookmin Bank stressed that the acquisition paved the way for KB Financial Group to grow into a general financial group in Indonesia along with its affiliates – KB Insurance, KB Kookmin Card and KB Capital.
“We faced many difficulties in negotiations due to travel restrictions due to the COVID-19 pandemic and local people’s sense of resistance against foreign capital’s takeover of an Indonesian bank,” a Kookmin Bank official said.
“So, we secured a controlling stake in Bukopin Bank in a short period of time by persuading local Indonesian financial authorities, major shareholders and stakeholders.”
KB Kookmin plans to grow Bukopin Bank into one of Indonesia’s top ten retail banks by combining systematic risk management know-how with advanced digital capabilities.
In the meantime, KB Kookmin Bank sold 1.75 million shares of SK Holdings to foreign institutional investors in the form of block deals, said sources in the financial industry on June 24. The price was known to be around 280,000 won per share.
KB Kookmin Bank earned about 300 billion won in proceeds from the sale thanks to a recent rise in the share price of SK Holdings.
The prices have risen sharply recently, reflecting expectations for the listing of SK Biopharm, a pharmaceutical subsidiary. The share price of SK Holdings jumped 71 percent to 286,500 won from 167,500 won at the end of March.
“We decided to sell it considering volatility in the financial market,” a KB Kookmin Bank official said. KB Kookmin Bank secured SK Holdings shares in the process of exchanging shares with SK Group in 2011.
KB Kookmin Bank, which had to sell its own shares in the process of establishing a holding company, traded its shares with the SK Group which needed to sell its stake in SK C&C. Afterwards, SK C&C and SK Holdings merged, making SK C&C shares held by KB Kookmin Bank into SK Holdings shares.