Morgan Stanley Says Korea Banks May Fund More Takeovers in 2010
South Korean banks may become more willing to finance acquisitions next year as the economy rebounds, said Morgan Stanley Executive Director Peter Chang.
Lenders may “begin to become more open over the next year on providing acquisition financing for deals,” Chang, 32, who oversees Morgan Stanley’s mergers and acquisitions advisory in South Korea, said in an interview in Seoul yesterday. “Improvements in the availability of financing will also help drive the overall level of M&A activity.”
South Korea’s benchmark stock index has jumped 47 percent this year as Asia’s fourth-largest economy leads a regional rebound from the deepest recession since the Great Depression. The economic recovery will fuel overseas takeovers by South Korean companies, Chang said.
“Korea’s economy has held up very well relative to other countries during the financial crisis,” he said. “We think that will create more opportunities for outbound M&A.”
South Korea’s growth will outpace all except China and India among the world’s 15 largest economies over the next two years, according to the International Monetary Fund. The average capital-adequacy ratio at the country’s 18 banks rose to 14.07 percent at the end of September, the highest since at least 2003, the Financial Supervisory Services said Nov. 25.
The ratio, which measures banks’ capital reserves against assets at risk, had fallen to as low as 10.86 percent a year earlier, forcing the government to set up a 20 trillion won ($17 billion) fund to replenish their capital.
Daewoo, Hynix
Morgan Stanley was the top adviser in mergers involving Korean companies this year, according to data compiled by Bloomberg. The New York-based company advised Doosan Heavy Industries & Construction Co. on its 451.6 million euro ($644 million) acquisition of Skoda Power AS of the Czech Republic, the South Korean company’s largest overseas takeover.
Not all companies expected to be up for sale next year will find buyers, Chang said. Korea Development Bank plans to select advisers this month for the sale of Daewoo Shipbuilding & Marine Engineering Co., the world’s second-biggest shipbuilder. Hynix Semiconductor Inc. creditors are accepting letters of intent from potential bidders until Jan. 29.
South Korea’s Financial Services Commission said Dec. 16 the government will focus on selling control of Daewoo Shipbuilding, Hynix, Daewoo International Corp. and Daewoo Electronics Corp. next year.
“It remains to be seen if these deals can all be completed over the coming year,” Chang said. “Particularly for larger assets, there are typically only a limited number of parties who are logical, viable acquirers.”