Daehan to Receive Additional 1.14 Trillion Won in Public Funds

Additional public funds worth 1.14 trillion won will be injected into Daehan Investment and Securities before being sold to a Hana Bank consortium at 475 billion won. This concludes a total of 3.94 trillion won in public funds that have been invested in Daehan.

The Singapore government-owned investment company Temasek Holdings is a part of the Hana Bank consortium and now holds 45 percent of Daehan’s shares.

As the sale of Daehan, following the sales of Hyundai Investment and Securities, and Korea Investment and Securities has been decided, restructuring for investment management companies, which has been acting as an uncertainty factor in the finance market, has been settled for the time being.

Settling the Sale of Daehan-

The government held a Public Fund Oversight Committee (PFOC) meeting on Friday afternoon, April 29, and settled the contract for the sale of Daehan Investment and Securities and public fund support measures.

The government will be injecting an additional 1.14 trillion won in public funds to bolster the financial state of Daehan. The government will also replenish the losses arising from lawsuits during the two years after the sale, which are expected to be some 30 billion won at the most.

Hana Bank will take 55 percent of Daehan’s shares, and Temasek will take the other 45 percent.

The PFOC’s executive office chief, Kim Kyo-sik, said, “We can acquire 380 billion won when selling the assets from Daehan in the market. With this and the 475 billion won from the sale, some 855 billion won will be retrieved.”

The government will investigate into the causes for Daehan’s ailing condition, and if faults in current and formal executives and employees are confirmed, they will be held accountable by civil and/or criminal liability law.

Investment Management Company Restructurings Will be Concluded-

With the sale of Daehan, the government’s sales of the three major investment management companies will be concluded.

The government sold Hyundai Investment to U.S.-based Prudential Finance last year in April, and sold Korea Investment this February to Dongwon, injecting a total of 12.78 trillion won in public funds into the three companies. Approximately 2.47 trillion won is expected to be retrieved (including future retrievals), which is only a mere 19.3 percent of the total amount to be retrieved.

With Daehan’s sale, the wave of restructuring among investment management companies will be concluded, forecasting a change in the securities and investment management field.

Large firms will concentrate on dominating the market, and smaller firms will go through mergers and acquisitions (M&A) or specialize in order to live.

In the securities field, it is possible that middle-small sized securities companies confronting large firms will attempt mergers.

Woori Investment and Securities President Park Jong-soo predicted, “Currently, several dozens of securities investment companies are flooding the market, but after going through asset management, they will eventually be reorganized into a four company-based system around Woori, Samsung, Donwon and Daehan.”

Chi-Young Shin Wan-Bae Lee higgledy@donga.com roryrery@donga.com