With many Korean securities firms up for sale, smaller players are having a difficult time finding a new owner

January 17, 2014 Leave a comment

In crowded market, scant interest in small securities firms

Jan 17,2014

With many securities firms up for sale, smaller players are having a difficult time finding a new owner, according to industry sources. 

Of the brokerages that poured out in the M&A market last year, only Woori Investment and Securities found a buyer. Late last year, NH Nonghyup Financial Group was selected as the preferred bidder of Woori Financial Group’s securities arm and the two are currently wrapping up negotiations.Along with Woori Investment and Securities, Hyundai Group is also expected to kick off its sales procedure for its brokerage affiliate, Hyundai Securities. According to the financial investment industry on Wednesday, Hyundai Group recently received proposals from foreign investment banks as part of its process of selecting a sales manager. Tongyang Securities also met with its sales manager and related officials yesterday to fix its sale timetable.
With these big securities firms turning aggressive in the acquisition market, small and midsize brokerages that were out for sale before the bigger ones are struggling to find investors. They include E-Trade Investment, IM Investment and Securities and Leading Investment and Securities.
“The expectation that the local securities industry will grow is very low,” said Lee Seok-hoon, a researcher at Korea Capital Market Institute. “Not only that but the outlook for small and midsize securities firms is uncertain because the impact on them after acquisition isn’t that big.”
Financial groups considered as potential buyers of small securities firms have announced their lack of interest. Hana Financial Group Chairman Kim Jung-tae made such an announcement as this.
And he’s not alone. Shinhan Financial Group Chairman Han Dong-woo also told reporters last week that “the contributions [securities firms] make in profit is very small.”
The biggest obstacle when selling a brokerage firm, industry observers say, is always the price. There is a wide forecast that the value of securities firms will fall even further because the industry is expected to remain sluggish. They note that there is no reason for buyers to be in a rush.
In fact, Han said he might consider buying a brokerage firm “if the price is cheap.”
As for Woori Investment and Securities, industry people expect the price after negotiation to fall by 5 percent from the one that has been proposed by NH Nonghyup Financial Group. The sales price of Hyundai Securities is also predicted to be between 700 billion won ($658.2 million) and 1 trillion won.
Industry sources have noted that, for Hyundai Securities, HMC Securities owned by Hyundai Motor Group and Hi Investment and Securities owned by Hyundai Heavy Industries could be potential buyers. However, the sales outlook isn’t bright.
“When Hyundai Motor Group acquired the current HMC Securities in 2008, the brokerage industry overall had a rosy outlook,” said an analyst from a securities firm. “The situation has changed dramatically and it won’t be easy for the conglomerate to be in lead to acquire another brokerage firm.”
BY AHN JI-HYUN [angie@joongang.co.kr]

Filed under Macro Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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