JKL Partners, which is in the race for the acquisition of HMM worth KWR5 trillion (US$3.76 billion) after forming a consortium with Harim Group, is accelerating its efforts to secure funding through the sale of Lotte Insurance.

According to the investment banking industry on September 19, Private equity fund JKL Partners, the largest shareholder of Lotte Insurance, has recently commenced the selection process for an underwriter for the sale of Lotte Insurance.

The subject of the sale is JKL Partners' 77 per cent stake in Lotte Insurance. JKL Partners acquired this majority ownership in Lotte Insurance by investing approximately KWR730 billion in 2019.

The current estimated selling price for Lotte Insurance is ranging from KWR2.7 trillion to KWR3 trillion. Lotte Insurance's market capitalization is currently at around KWR740 billion. This represents a significant increase from the previous market capitalization of approximately KWR556.7 billion before the news of the sale emerged, causing a sharp price surge.

In the industry, there is a sentiment that a selling price exceeding KWR2 trillion, when considering the management control premium, may be excessive, given that Lotte Insurance is a publicly traded company and its value is influenced by the market.

Considering Lotte Insurance's market share and its recent lacklustre performance over the past few years, there are opinions suggesting that it may be unrealistic to expect an overvaluation.

On the other hand, Korea Development Bank (KDB) recently estimated the expected selling price of HMM to be at least KWR7 trillion during a business report presentation regarding the sale. If a management control premium of 20 per cent is factored in, the HMM selling price would increase to KWR8.4 trillion. KDB plans to secure the highest bid offered.

With the expected selling price of HMM surpassing industry expectations, it is understood that KDB is also considering the possibility of no successful bids. It has been reported that potential acquirers have bid around KWR5 trillion for HMM, indicating their substantial interest in the company.

The selling side selected Harim Group, LX International, and Dongwon Industries as qualified bidders for HMM on September 4 and initiated the due diligence process.

Based on the financials as of the first half of this year, the asset sizes of the qualified bidders are approximately KWR14 trillion for Harim Group, KWR8 trillion for LX International, and KWR7 trillion for Dongwon Industries.

Looking solely at asset size, Harim Group appears to be the only candidate with the capacity to acquire HMM, according to BusinessKorea.