Domestic Activist Fund Proposes Merger of Regional Financial Groups

Align Partners Asset Management, a domestic activist fund, has publicly proposed a merger between JB Financial Group and BNK Financial Group. The fund sent an open shareholder letter to both financial holding companies, requesting they initiate a review of a potential merger. Align Partners seeks a response on whether they will begin the review by August 7 and a public announcement of the review's findings by the third-quarter earnings release.

If the merger materializes, it would create South Korea's largest single regional financial holding company, with an estimated total asset of 234 trillion won by 2025. Align Partners, which held over 14.83% of JB Financial Group and more than 1% of BNK Financial Group as of July 10, argues that the merger is crucial due to the declining populations in the Honam and Yeongnam regions and the increasing economic concentration in the Seoul metropolitan area. These factors are steadily weakening the market position of regional banks.

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This proposal is not to push for an immediate merger, but a request for the boards of both companies to conduct an independent and professional review for the benefit of the company and all shareholders, and to disclose the results to shareholders.

Align Partners proposed an "alliance-type merger holding company" structure, where separate legal entities and brands in each region (Jeonbuk Bank, Gwangju Bank, Busan Bank, Gyeongnam Bank) would be maintained. The fund believes that even if the two groups continue independently or convert into commercial banks, they will struggle to bridge the gap with larger commercial banks in the long term. Therefore, integrating regional financial holding companies is presented as a realistic solution.

The fund urged both companies to establish a special committee composed of independent directors and appoint global investment banks and strategic consulting firms to assess the strategic and financial feasibility of the merger. Lee Chang-hwan, CEO of Align Partners, emphasized that the proposal is not for an immediate merger but for the boards to conduct an independent and professional review for the benefit of the companies and all shareholders, with the results disclosed to shareholders. He added that if the review is refused for unclear reasons, Align Partners is prepared to exercise its shareholder rights.

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If the review is refused for reasons that are difficult to understand, we are considering exercising the necessary shareholder rights.