이 기사는 2020년 06월 29일 08:00 thebell 에 표출된 기사입니다.

South Korean private equity firm VIG Partners has completed the acquisition of a controlling stake in Preedlife on June 25, according to sources, creating the country’s largest funeral service provider.

VIG’s investment in the funeral industry dates back to 2016 when the firm bought the mid-sized funeral service company Jounlife. It has since made two add-on acquisitions of smaller businesses – Kumkang Mutual Aid and Modern – in 2017 and 2019 respectively.

The acquisition of Preedlife, the number one player in the industry, was a result of VIG’s years-long efforts to build a strong relationship with the company’s management. VIG approached Preedlife six years ago because it thought growing in size by combining with a bigger company was crucial to better position its funeral service business against the backdrop of industry consolidation.

VIG plans to merge Jounlife into Preedlife. The combined entity will have 1.26 trillion won ($1.0 billion) in assets and 1.5 million members, the largest in the country’s funeral industry, while its accumulated premium income is expected to stand at 1.15 trillion won.

Both Preedlife and Jounlife have strong financial profiles. At the end of 2019 the risk-based capital (RBC) ratio and debt-to-asset ratio were 105 percent and 95 percent for Preedlife and 114 percent and 88 percent for Jounlife, compared to the industry average of 91 percent and 108 percent.

Preedlife, which will become even bigger after the merge, is expected to see a more rapid pace of profitability growth in the future. Especially, apart from operating income growth, income from investment of premiums – which is also critical for profitability – could increase exponentially as the company’s accumulated premium income rises faster than before the combination.

The funeral industry in the country has continued to grow, with total premium payments reaching 5.8 trillion won and the number of members using such services surpassing 6 million at the end of 2019, according to data from the Fair Trade Commission.

Boram Sangjo Group, the second largest player in the industry, also has recently acquired a smaller rival, which will increase the accumulated premium income of the combined entity to 1.02 trillion won. Its RBC ratio and debt-to-asset ratio are estimated at around 88 percent and 113 percent respectively.

Preedlife is the second investment by VIG’s fourth blind-pool fund that closed earlier this year at 950 billion won. The fund’s first investment was in education service provider D.Share.

(Reporting by Hee-yeon Han)