DGB Financial Group, a Daegu-based financial holding firm in South Korea, is taking over HI Investment & Securities Co. for about $400 million from Hyundai Heavy Industries Group to add brokerage business in the financial holding group portfolio.

According to sources from the investment banking (IB) industry on Thursday, DGB Financial Group will ask its board of directors to vote on its plan to acquire HI Investment & Securities during an upcoming board meeting scheduled on Nov. 8. DGB Financial Group and Hyundai Heavy Industries, parent company of Hyundai Mipo Dockyard Co. that holds the largest stake in HI Investment & Securities, will sign a stock purchasing agreement once the plan is passed at the board meeting of each company.

Market sources estimated the deal value would be set at slightly above the brokerage’s book price of 450 billion won ($404.6 million). The deal includes HI Investment’s subsidiaries - HI Asset Management Co. and Hyundai Futures Corp.

As of 3.00 p.m. on Friday, shares of DGB Financial rose 0.5 percent to 10,150 won in Seoul trading.

DGB Financial whose main revenue source is its commercial bank arm Daegu Bank that serves Daegue and surrounding areas in the southern part of the country has been seeking to strengthen its business portfolio. In 2015, DGB announced that it would raise the share of the non-banking business to 25 percent by this year. As the only financial holding firm in Korea without a brokerage unit, it has been pursuing investment business by mulling a takeover of SK Securities Co. and joining a bid to acquire Cape Investment & Securities Co., former LIG Investment & Securities. None of the previous takeover attempts has succeeded.

“Acquisition of HI Investment & Securities is part of DGB’s strategy to join the ranks of a universal financial group by bolstering the non-banking sector,” said a source from the IB industry. “Financial holding firms running regional lenders including DGB are expected to go aggressive in expanding their business area.” DGB however won’t likely keep asset management and derivatives unit of HI and try to resell them.

Once Hyundai Heavy Industries succeeds in disposing HI Investment & Securities, it would also help the shipbuilding conglomerate significantly improve its balance sheet and speed up the process of transitioning into a holding structure. Hyundai Heavy that has embarked on a group-wide restructuring process this year to have Hyundai Robotics Co. act as a non-financial holding entity cannot hold stakes in financial units.

By Chung Seung-hwan and Choi Mira

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