[비즈한국] Hanyang Securities001750, a 'niche' brokerage firm, is set to welcome a new owner. Domestic private equity firm KCGI signed a share purchase agreement with the Hanyang Foundation on the 19th and is now awaiting approval for the change of major shareholder from financial authorities. However, as noise surrounding the acquisition has persisted both inside and outside the company since before the deal, attention is focused on whether the firm can calm the anxieties of Hanyang Securities employees and successfully secure approval.
On September 19, Hanyang Securities announced that the Hanyang Foundation, Baeknam Tourism, and HBDC had signed a share sale agreement with private equity firm KCGI. KCGI acquired a 29.59% stake (3,766,973 shares) from the Hanyang Foundation (11.59%), Baeknam Tourism (10.85%), and HBDC (7.45%) at 58,500 won per share, successfully purchasing Hanyang Securities for approximately 220.4 billion won—over 20 billion won lower than the initially proposed acquisition price (approx. 244.8 billion won, or 65,000 won per share). The transaction closing date is set for March 20, 2025. The deal will be finalized following approval for the change of major shareholder by the Financial Services Commission.
The contract was signed two months after Hanyang Securities officially announced its sale. Following media reports, Hanyang Securities acknowledged the sale on July 15, stating, 'The largest shareholder, the Hanyang Foundation, is pursuing the sale of its stake.' Subsequently, the Hanyang Foundation, having received approval from the Ministry of Education, moved quickly to select KCGI as the preferred bidder and LF067080 as the runner-up on August 2. Although KCGI was granted exclusive negotiation rights for five weeks, it failed to sign the contract within that period and extended it twice, finally inking the deal on September 19, just one day before the deadline.
While Hanyang Securities is a small brokerage firm ranking in the mid-to-late 20s domestically, it is considered a strong niche player. In the first half of this year, its revenue was 398.4 billion won, a 30% decrease from the same period last year (568.6 billion won), but during the same period, operating profit increased by 13% (32 billion won → 36 billion won) and net profit rose by 11% (23.3 billion won → 25.9 billion won). Its equity capital has also grown steadily, reaching 505.7 billion won in the first half of this year. Its Return on Equity (ROE), an indicator of profitability, exceeded 10% (annualized basis).
The reason such a solid firm as Hanyang Securities has appeared on the M&A market is due to the financial difficulties of its largest shareholder, the Hanyang Foundation. Faced with worsening financial conditions among its affiliates, the foundation opted to secure cash by selling its stake in Hanyang Securities. The construction firm Hanyang Industrial Development has accumulated hundreds of billions of won in debt due to the real estate project financing (PF) crisis, while Hanyang University Hospital is experiencing financial distress due to the trainee doctor strike and Hanyang University is struggling due to a tuition freeze.
The problem is that noise has continued since KCGI was selected as the preferred bidder. KCGI, known as an activist fund, is led by CEO Kang Sung-boo, a former prominent domestic analyst. KCGI owns KCGI Asset Management (which acquired Meritz Asset Management in January 2023) and KCGI Alternative Investment Management as subsidiaries. If it successfully acquires Hanyang Securities, it will also add a brokerage firm to its portfolio.
While this might appear to be a solid portfolio, Hanyang Securities employees have pushed back, calling it a 'reckless acquisition.' On September 2, the Hanyang Securities labor union (the Hanyang Securities branch of the Korean Financial Industry Union) held a protest in front of the company against the sale, voicing their demand: "If you must sell, sell to a sound capital source."
The union argued, "KCGI has previously failed in its acquisition attempts, such as those for One Store and Nextin, because it could not raise the necessary 100 billion won in funds." They added, "Even if they acquire Hanyang Securities through aggressive financing, once they receive financial investment, the pressure for quick capital recovery will increase, which could lead to management instability, such as selling off real estate. This will inevitably lead to layoffs." They point out that given the nature of private equity funds—buying a company and reselling it to reap profits for investors—job insecurity and deterioration of the company are inevitable.
The fact that KCGI failed to sign the contract within the negotiation period also fueled speculation about its difficulty in raising funds. KCGI formed an institutional-only private equity fund to secure the investment, and the firm explained, "We have received investment commitments from institutional investors who will participate as limited partners in the fund." Participating institutional investors reportedly include OK Financial Group and Meritz Securities.
Furthermore, allegations of a 'parking deal' have been raised. A parking deal refers to a situation where a company pretends to dispose of management rights, only to reclaim them after a certain period. The Hanyang Foundation retained about 5% of its stake even after the sale, and the union pointed to factors such as the fact that the son of a major shareholder of the Hanyang Foundation found employment at KCGI, and that CEO Kang Sung-boo previously served as an adjunct professor at the Hanyang University School of Business, as background for these allegations.
Regarding these controversies, KCGI stated, "We will strive to inherit the traditions of Hanyang Securities and become an exemplary case of corporate governance that satisfies employees, shareholders, creditors, and customers alike." They added, "We will manage the company so that it grows into one that provides dreams and hope to its members, rather than one that remains stagnant."
As the Financial Supervisory Service prepares for the review of the change in major shareholder for Hanyang Securities, attention is also focused on whether the parking deal allegations will impact the review period. Requirements for approval of a change in major shareholder, according to the 'Enforcement Decree of the Act on Corporate Governance of Financial Companies,' include assessments of financial soundness, debt ratios, and social credibility. Since KCGI is acquiring Hanyang Securities by forming an institutional-only private equity fund, the same requirements are expected to apply to the limited partners (the financial companies participating in the investment). Looking at past brokerage M&A cases, Kakao Pay applied for a change in major shareholder for Baro Investment & Securities in April 2019 and did not receive FSC approval until February 2020, about a year later.