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| Align Partners CEO Lee Chang-hwan / Courtesy of Align Partners |
By Anna J. Park
With regard to Woori Financial Group's plan to acquire Daol Investment, the country's top-notch venture capital firm, Align Partners, which holds about 1 percent of the financial group's shares, has voiced its opposition to the deal.
After the venture capital firm was put up on the M&A market late last year, Woori Financial declared its intent to acquire the company to the firm managing the sale. Market watchers expect the venture capital firm would be priced at around 300 billion won ($241 million) at most.
However, Align Partners CEO Lee Chang-hwan has been arguing that the acquisition would impair shareholder value, if inked at the expected market price. He urged Woori Financial management to take measures to normalize their own stocks' valuation, such as retiring shares through buying back and canceling them, before implementing any M&A deals.
"Considering that local bank shares' average price-to-earnings ratio (PER) stands at around three, it would be much more favorable (in terms of raising shareholder value) for these financial companies to retire their own shares by repurchasing them with the money slated to be injected for M&A deals," Lee explained to the Korea Times.
"Assuming that Woori Financial Group decides to purchase the 52 percent stake in Daol Investment for 200 billion won to 300 billion won as news reports say, it means that Woori gets to buy Daol shares with PER standing at 85 to 128 times, when calculated with the venture capital firm's net profits logged during the past four quarters."
He added that even when calculating the PER with the venture capital firm's all-time-high earnings logged in 2021, the PER would be 5.9 to 8.9 times, which is still way higher than Woori Financial shares' PER of 2.4 times.
"Thus, if Woori Financial Group goes through with the acquisition, the management and the board should be prepared with persuasive logic and grounds to promote the relevance of the deal to shareholders, who would argue that the money for the deal would be better spent on retiring stocks or on increasing dividends to stoke shareholder value," Lee said.
Regarding such comments, Woori Financial Group said that nothing has been determined or confirmed about the potential acquisition of Daol Investment.
Align Partners has recently been raising its voice as an activist fund, as it sent letters to four major financial groups and several major banks nationwide, urging them to raise shareholder value through expanding dividend payouts or buying back their own shares.
The asset management firm said that local banks' stocks are extremely undervalued due to their low shareholder return ratios. While the shareholder returns of most major global firms, including Bank of America and Wells Fargo, average 64 percent, local financial groups' share return ratios are slightly above 20 percent on average.
