Hanwha Chemical has reduced its stake in Hanwha Life Insurance through a block trade that priced at a discount of 9.7% to the latest close and raised W122.4 billion ($112 million), a source said yesterday.
The deal was launched at around 3.40pm Hong Kong time on Monday and completed early yesterday. It saw Hanwha Chemical sell a 1.9% stake in the insurance company, which was previously known as Korea Life Insurance, reducing its holdings to 1.8% from 3.7%.
It sold 17 million shares at a price of W7,200 each. The shares were marketed in a range between W7,200 and W7,500, which translated into a discount of between 5.9% to 9.7% to Monday’s close of W7,970.
The final discount of 9.7% is wide for a block trade in Korea, where even sizeable transactions tend to come at discounts of less than 5%. Of the 14 block trades in Korean names covered by FinanceAsia since the start of 2012, only one was priced at a wider discount than 5% (at 6.5%). Four deals priced at a discount below 1.5%.
One market watcher noted that the insurance sector in Korea is not that popular with investors at the moment and Hanwha Life is also trading at a pretty rich valuation, so the discount may have been necessary to compensate for that.
According to the source, the deal drew good interest from both domestic and international accounts and was oversubscribed. About 65 investors submitted orders. The buyers included domestic long-only investors and international regional and global funds.
Hanwha Life’s share price dropped 9.8% yesterday to W7,190, sliding below the placement price. As of Monday’s close, the stock had risen 12% from this year’s low of W7,110 on February 12. The Kospi index, which fell 0.5% yesterday, gained about 3.3% during the same period.
Hanwha Life’s share price is now down 7.3% year-to-date, while the Kospi index is almost unchanged.
Earlier this month, it was reported that Hanwha Life was studying the feasibility of buying ING’s Korean insurance unit.
On December 18 last year, ING said that it was continuing to “explore all options for the divestment of its life insurance business in South Korea” after an earlier agreed sale of the unit to KB Financial for $2.1 billion fell through.
Including Hanwha Life, accelerated offerings in six Korean issuers have raised a total of $929 million so far this year, according to Dealogic. The biggest deal was ING Group’s exit from KB Financial Group through a block trade that raised $671 million at a tight 1.4% discount.
Three of the other deals came at a wider discount than Hanwha Life (between 9.9% and 12.5%) although they were significantly smaller at between $7 million and $40 million, the data show. Two of them are Kosdaq-listed companies that are part of the same group and were being sold through concurrent blocks by the same vendor. The other two deals came at discounts of less than 2.5%.
Hanwha Life was established in 1946 as Korea’s first life insurer and since then it has grown to become one of the country’s most prominent financial services providers, according to the company’s website.
It offers a full range of products, from traditional insurance, such as whole life and variable life insurance, to more tailored and specialised products, such as critical illness insurance and annuities, it says. It is also engaged in employee benefit planning and corporate pensions to total consulting services.
Along with Hanwha Chemical, two other related shareholders — Hanwha Engineering & Construction and Hanwha Corp — are also subject to a 90-day lock-up. According to Hanwha Life’s website, Hanwha Engineering & Construction owns 24.88% of the company, while Hanwha Corp has 21.67%.
Hanwha Securities and Morgan Stanley were joint bookrunners for the deal.
