Will IGIS Asset Management Be Acquired by Hillhouse?... 'Eligibility Review for Largest Shareholder' Is Key

In the sale of IGIS Asset Management, the largest real estate asset management company in South Korea, a foreign private equity fund (PEF) manager has been selected as the preferred bidder. Attention is now focused on whether the label of "Chinese capital" can be removed during the financial authorities' review of the eligibility of the largest shareholder.

According to industry sources on December 9, Morgan Stanley and Goldman Sachs, the advisors for the sale of IGIS Asset Management, have selected Hillhouse Investment, an overseas PEF manager, as the preferred bidder. Hillhouse Investment outbid competitors Hanwha Life Insurance and Heungkuk Life Insurance by offering a purchase price in the mid-900 billion won range to around 1.1 trillion won. This was possible because the bidding process was conducted as a "progressive deal," allowing acquisition candidates participating in the main bid to further increase their offers.

After the preferred bidder is selected, the next step is the financial authorities' review of the eligibility of the largest shareholder. The transaction, including payment of the remaining balance, is expected to be finalized next year. Under the Act on Corporate Governance of Financial Companies, when the largest or major shareholder of a financial company such as a bank, asset management company, or securities firm changes (through equity acquisition, change of control, etc.), approval for the change of largest shareholder and an eligibility review are mandatory.

The review applies not only to simple stock acquisitions but also to "special related parties" or corporations with complex investment structures that could substantially influence the control of the company. Samty AMC, which Hillhouse Investment has put forward as the acquiring entity in this deal, is also subject to review. Samty AMC is an affiliate of Japan's Samty Holdings, which was acquired in October last year by Lava Partners, a real estate-focused subsidiary spun off from Hillhouse in 2020. Samty Holdings, a leading real estate developer, is responsible for real estate asset management.

Industry insiders believe that the "Chinese capital" label attached to Hillhouse Investment could become an obstacle during the eligibility review for the largest shareholder. While Hillhouse is expected to pass quantitative criteria such as investment capability and capital soundness, there are concerns that it may be disadvantaged in qualitative areas such as financial market stability and public interest considerations.

An investment banking industry source commented, "The fact that the largest domestic real estate asset manager is being acquired by foreign capital is significant. Given the recent rise in negative sentiment toward China, partly due to incidents like the Coupang data breach, the authorities are likely to approach this matter cautiously."

Hillhouse Investment was founded by Zhang Lei, a Singaporean of Chinese origin, with funding from Yale University's endowment. Initially, it achieved success by investing in Chinese tech giant Tencent, and later diversified its investment strategy to include countries such as South Korea and Japan. Its business areas have also expanded beyond traditional private equity to include real estate, private credit, and infrastructure.

However, some argue that Hillhouse's extensive track record of investments in South Korea should not pose a problem. The firm has already invested in companies such as Woowa Brothers (Baedal Minjok), Kurly, Krafton, SK On, and SK Ecoprime.

Hillhouse's limited partners (LPs) include institutional investors from across the Americas, Asia, Europe, and the Middle East, such as university endowments, foundations, sovereign wealth funds, and family offices. More than 90% of external capital comes from sovereign wealth funds and pension funds in the Americas, Southeast Asia, and the Middle East. Chinese investors account for less than 5% of LP capital. While its roots are in China, Hillhouse is now a multinational PE manager operating globally, especially in Asia, so there are no major disqualifying factors, according to some analyses.

A large PE firm insider said, "The founder of Hillhouse is of Chinese origin, but capital itself has no nationality. Given Hillhouse's significant investment history in Korea and its ongoing portfolio expansion, there should not be any major issues."

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