Chairman Cho Yong-byeong of Shinhan Financial Group. (Photos: SFG)

Joseph Y. Bae, Co-president.(left) George R. Roberts, Chairman of KKR.

Kohlberg, Kravis and Roberts (KKR), a global PEF, will soon become a major shareholder of Shinhan Financial Group when it acquires around 3.55 percent of the group’s shares. It will take over new shares to be issued during the first half of next year and swap its 9.9 percent share in ING Life with the financial group’s shares when the Orange Life Insurance Co. officially becomes an affiliate of the financial group, which will also take place in the first half next year.

Chairman Cho Yong-byeong signed an MOU on the strategic agreement between Co-President and Co-Chief Operating Officer Joseph Bae of KKR on Oct. 14, financial sources said. The MOU also provides for the two financial groups going for the creation of PEFs worth some 5 trillion won in the near future, allowing them to engage in IB transactions overseas.

KKR took over a 9.9 percent stake in ING Life from Shinhan Financial Group and later KKR will exchange the LNG stake with the shares of the financial group when the life insurance firm becomes an affiliate of the group early next year.

With a 3.55 percent stake in Shinhan Financial Group, KKR will become a major stakeholder, taking over the role played by BNP-Paribas, which will gradually sell off its 3.55 percent shares in the financial group.

Shinhan Financial Holding is the largest stakeholder of the group, with a 10 percent stake, and the financial group will be able to strengthen its global IB activity to make good use of the PEFs to set up jointly with KKR. Other stakeholders include National Pension Service with 9.55 percent stake, Blackrock with 6.13 percent stake, and BNP-Paris-bas with 3.55 percent stake. KKR is the second foreign IB to hold a stake in the financial group after the French bank in 11 years.

The two financial groups agreed to set up PEFs worth 4 trillion won in the future based on the MOU they signed. They will go for setting up 1 trillion won in PEF first in the near future to be followed by several more similar PEFs.

Chairman Cho started his talks with KKR Co-President Bae when they were in Washington D.C. to attend a World Bank-IMF annual general conference in October, last year. Cho started to look for a foreign partner to strengthen the group’s overseas operations in line with the group’s strategy to boost its overseas earnings to 20 percent of total earnings for the group from the present 13 percent.

The talk went on for over a year to finally come to an agreed to sign an MOU in their meeting in Seoul. KKR

Joseph Y. Bae (New York) is the Co-President and Co-Chief Operating Officer of KKR. He joined KKR in 1996. Most recently, he was the Managing Partner of KKR Asia and the Global Head of KKR's Infrastructure and Energy Real Asset businesses. KKR manages a PEF with 192 trillion won in fund set up in 1976 as a leading PEF who introduced LBO strategy for the first time in the global M&A market.

The system is about the use of the funds secured from a bank by placing the target firm as the mortgage and pay for the M&A with the secured funds It is the third largest PEF in the world after Carlisle and Blackstone.

KKR, a U.S.-based investment firm, together with South Korean real estate fund management company IGIS Asset Management (IGIS), announced that they have made an investment along with the National Pension Service of Korea (NPS) to acquire a mixed-use real estate project under development in the Gangnam Business District (GBD) in Seoul, South Korea.

The project, to be purchased from a consortium led by Korean engineering firm Daor E&C, is expected to cost approximately 2.1 trillion won ($1.9 billion) in total, inclusive of the purchase price and further costs to complete.