Hanyang Securities up for sale; in talks with KCGI, Woori

Hanyang Securities Co., a small South Korean brokerage firm, has been put on the market as its parent Hanyang University Foundation scrambles to keep afloat its property development unit and university hospital, which are grappling with liquidity crunches according to people familiar with the matter.

Seoul-based private equity firm KCGI, logistics-to-trading conglomerate LX Group and Woori Financial Group are vying for a controlling stake in the brokerage firm, a deal estimated at up to 150 billion won ($109 million), the sources said.

Market Insight, the capital market news outlet of The Korea Economic Daily, reported on the proposed stake sale on Sunday, driving the share price of Hanyang Securities 9% higher to 15,200 won around midday.

In response to the report, Hanyang Securities on Monday confirmed that the Hanyang University Foundation, its top shareholder, has put the company up for sale. But it said nothing has been decided on details such as its buyer, sale price and sale process.

The sources said that KCGI, better known as an activist fund, is the most aggressive of potential buyers in bidding for the country’s 30th-largest brokerage house in terms of equity capital.

Hanyang Securities, a specialist in fixed income trading, could be a good fit for KCGI, which was founded in 2018 by Kang Sung-boo, a former fixed-income analyst.

The investment fund is understood to envision a full-fledged financial group with the possible purchase of Hanyang Securities after it took over Meritz Asset Management,  now called KCGI Asset Management, in 2023.    

The Hanyang University Foundation holds a 16.29% stake in the brokerage arm. Including the shares held by other stakeholders, the foundation controls 40.99% of the firm.

Based on its market cap of about 177.6 billion won as of Friday, the value of the controlling stake is estimated at 100 billion won to 150 billion won ($72 million-$109 million), including a management premium.

If the stake sale goes through, it will mark the first time for the brokerage company to change hands in its 68-year history.

WOORI FINANCIAL GROUP, LX GROUP

Woori Financial, Korea’s No. 4 banking group, is also interested in Hanyang Securities.

It is on the market a few months after Woori acquired Korea Foss Securities Co. in May. Korea Foss will be rebranded as Woori Investment & Securities Co., the namesake of its former brokerage unit, which it sold to NongHyup Financial Group in 2014.

LX Group, split off from LG Group, is said to also have shown interest in Hanyang Securities. The conglomerate has been active in the domestic M&A market. Last year, it considered joining the race for the country’s No. 1 shipping company HMM Co. and Jeonju Paper Corp.

Industry watchers said there is a dearth of domestic brokerage firms on the market; thus, Hanyang Securities provides a rare opportunity to buy one.

The proposed sale of a controlling stake in the brokerage firm comes as building developer Hanyang Industrial Development Co. reels from the project financing market meltdown amid a prolonged slump in the real estate industry.

Last year, it racked up losses of 49.6 billion won, with contingent liabilities linked to project financing exceeding 400 billion won.

Moreover, a surge of losses at Hanyang University Hospital after its junior doctors quit en masse in February to protest a sharp increase in the medical school admissions quota dealt a heavy blow to the private education foundation.

Write to Jong-Kwan Park at pjk@hankyung.com
Yeonhee Kim edited this article