Controversy clouds Hillhouse Investment’s acquisition of IGIS Asset Management

IGIS Asset Management headquarters in Seoul / Courtesy of IGIS Asset Management

Hillhouse Investment has been named the preferred bidder to acquire IGIS Asset Management, the nation’s largest real estate manager, industry officials said Tuesday.

However, the decision has sparked controversy, with regulatory approval likely to face hurdles due to national security concerns, and a rival bidder alleging procedural unfairness.

According to sources, the global private equity fund did not initially submit the highest bid, offering only the mid-900 billion won range during the main auction. However, after the deal’s advisers, Morgan Stanley and Goldman Sachs, introduced a “progressive deal” — a process in which short-listed bidders were invited to raise their offers — Hillhouse Investment significantly increased its bid to 1.1 trillion won ($747 million), positioning it as the front-runner to acquire IGIS Asset Management.

Heungkuk Life offered around 1.05 trillion won, while Hanwha Life, another participant, reportedly submitted a bid in the mid-900 billion won range. The takeover was initially expected to be a two-way contest between these two domestic insurers.

The final hurdle of the acquisition is the regulator’s review, which is expected to conclude next year. Under current regulations, financial institutions must secure approval and pass a suitability review whenever their major shareholder changes through a share acquisition or a shift in control.

Market watchers expect Hillhouse Investment’s perceived ties to Chinese capital to pose a challenge during the process.

Founded by Zhang Lei, a China-born Singaporean, Hillhouse Investment rose to prominence through early investments in companies like Tencent and Baidu. As it expanded, the firm attracted foreign media scrutiny over alleged ties to senior Chinese officials. The firm has since diversified its strategy, growing into a global firm that holds over 500 portfolio companies across 30 countries. In Korea, it has invested in companies such as Woowa Brothers, Kurly, Krafton, SK On and SK Ecoplant since 2007.

The concern is that IGIS Asset Management handles extensive information related to key national infrastructure, having grown with capital from Korean public institutions such as the National Pension Service. This has raised red flags among market watchers regarding the management of sensitive data by a foreign fund, especially amid growing domestic wariness toward Chinese-linked capital.

Heungkuk Life has also raised questions about the fairness of the sale process.

In a statement released Tuesday, the insurer said the advisers had initially promised not to pursue a progressive deal. Heungkuk Life had submitted the highest offer in the main auction, but was overtaken after Hillhouse increased its bid during the progressive deal stage.

The insurer suggested that its bid price may have been leaked to a competitor and said it is considering legal action, including a review of whether the nondisclosure agreement was violated.

“This decision is a joint creation by a China-linked private equity fund eyeing Korea’s real estate investment platform and foreign advisers driven by performance fees,” it said in the statement. “It overstepped the discretion granted to the seller and undermined trust and order in the capital market.”