Woori Financial Group's efforts to fully acquire Dongyang Life Insurance have encountered a hurdle due to the Financial Supervisory Service's request for corrections to its securities registration statement. Woori Financial is accelerating its non-banking portfolio enhancement through the acquisition of Dongyang Life and ABL Life, but the process of consolidating the remaining shares of Dongyang Life has raised key issues regarding shareholder protection and conflict of interest management.
According to sources in the financial sector, the Financial Supervisory Service recently requested corrections to the comprehensive stock exchange registration statement submitted by Woori Financial regarding Dongyang Life. Woori Financial had planned to complete the acquisition of Dongyang Life as a wholly-owned subsidiary by August and finalize the delisting process. However, the need for supplementary information has introduced uncertainty into this timeline.
A representative from the Financial Supervisory Service stated, “The comprehensive stock exchange that involves delisting is crucial for shareholder protection,” adding that the review of the registration statement focused on whether the procedures were adequately followed according to relevant guidelines.
This situation is closely tied to Woori Financial's strategy to strengthen its non-banking operations. Woori Financial currently holds a 75.34% stake in Dongyang Life and aims to secure the remaining shares through a comprehensive stock exchange to fully integrate it as a subsidiary. The choice of stock exchange over a public buyout is seen as a way to avoid significant cash outflows and potential impacts on the common equity tier 1 (CET1) capital ratio.
However, the stock exchange structure means that Dongyang Life shareholders will receive new shares of Woori Financial instead of cash. Each shareholder will receive 0.2521056 shares of Woori Financial for each share of Dongyang Life they hold, with the exchange prices set at 34,589 won per Woori Financial share and 8,720 won per Dongyang Life share. Some shareholders of Dongyang Life have expressed dissatisfaction, arguing that the value offered to ordinary shareholders is lower compared to the price of 10,562 won per share that Woori Financial paid to acquire shares from the previous major shareholder last year.
The Financial Supervisory Service's scrutiny appears to stem from this structural conflict of interest. They have requested additional explanations to ensure that Dongyang Life shareholders can adequately assess the transaction structure and pricing rationale. Although Woori Financial submitted a 1,700-page securities registration statement, the request for corrections means they will likely need to enhance the revised statement with details on shareholder protection procedures and the rationale for choosing the stock exchange method.
For Woori Financial, the full acquisition of Dongyang Life is not merely a matter of consolidating shares. They are in a position where they need to bolster their revenue structure, which heavily relies on banking, by developing the insurance sector as a core non-banking pillar. Considering the planned integration of Dongyang Life and ABL Life, restructuring governance is seen as the first step in future reorganization of the insurance division.
Meanwhile, analysts suggest that the likelihood of the stock exchange method being converted to a public buyout is low due to the nature of the Financial Supervisory Service's concerns. The focus of their inquiry is not on whether to conduct a public buyout, but rather on whether Dongyang Life shareholders have been sufficiently informed about the transaction structure and pricing rationale during the comprehensive stock exchange process. A financial sector insider remarked, “The request for corrections from the Financial Supervisory Service seems more aimed at ensuring that shareholder protection procedures and conflict of interest management are more clearly articulated rather than changing the stock exchange method itself.”
* This article has been translated by AI.
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