U.S. News

Goldman to Buy South Korea Asset Manager from Macquarie


Goldman Sachs said on Monday it has agreed to acquire a South Korean asset management firm, majority owned by Australia's Macquarie Bank, marking its first entry into the country's retail fund business.

The deal, whose value was not disclosed, underscores growing interest from global financial services firms in the country's $250 billion asset management sector as retail assets are flowing into investment products from bank deposits for higher returns.

Asset management is one of key financial services which South Korea wants to open up to foreign competition as part of efforts to build the country's financial clout in Asia.

"This acquisition is a significant milestone for GSAM (Goldman Sachs Asset Management) in Korea, a growing financial hub with significant market potential, said Stephen Fitzgerald, head of GSAM International, in a statement.

"Through this acquisition, GSAM will establish a meaningful presence in Korea."

Under the deal, Goldman is buying 100% of Macquarie-IMM Investment Management, 65% owned by Macquarie and 35% by South Korea's investment firm IMM & Co. The fund manager has about 10 trillion won ($10.78 billion) in assets under management.

Based on the managed assets, the value of the acquisition is estimated at 120 billion-180 billion won, taking into account the valuations of the 2006 deals by Swiss investment banks UBS and Credit Suisse in South Korea.

UBS agreed to pay up to $190 million for 51% of Hana Financial Group's fund management unit that has 19.6 trillion won under management, while Credit Suisse paid $56 million for 30 percent of Woori Financial Group's fund management arm that oversaw 14.2 trillion won.

The announcement comes after Reuters said on April 25 that the U.S. investment bank was finalizing talks to buy the asset manager, quoting two sources familiar with the situation.

The deal is expected to close later this year, subject to regulatory approval, Goldman said in the statement.

Attractive Offer

Macquarie, the biggest foreign investment bank in South Korea, said Goldman's offer was too good to ignore.

"We were approached by Goldman," Macquarie spokesman John Larkin said. "The offer was quite attractive ... so we decided to accept the offer."

Among 14 fund management firms controlled by foreign companies, Macquarie-IMM is a small-sized player with a pre-tax profit of 3.7 billion won in the nine months to December 2006, with a capital of 13 billion won.

Macquarie runs another asset management unit, Macquarie Shinhan Infrastructure Asset Management, with South Korea's No. 2 lender, Shinhan Financial Group. The joint venture is ranked the biggest foreign player by assets in the country.

In South Korea, Goldman has been focused on businesses with corporate customers and private equity investment, including its 9% stake in Hana Financial, the country's No. 4 financial services group.

Facing stiff competition from strategic domestic rivals in private equity deals, foreign banks are turning to serving retail customers, targeting 1,500 trillion won in individual financial assets. According to the Bank of Korea, half of those funds have been put in deposits at end-2006.

The announcement also comes ahead of the regulatory Financial Supervisory Service's review on Friday of JPMorgan's final application to open the 50th asset management unit in South Korea.