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Korea’s National Pension Service Involved In USD 200 Mio Dongwon-Calvo Deal

South Korea’s National Pension Service, the world’s fourth-biggest pension fund, is poised to make the first investment from a Won8tn (USD 7 bn) scheme intended to help accelerate overseas acquisitions by the country’s companies.

Jun Kwang-woo, NPS chairman, said he expected that pension funds and sovereign wealth funds would increasingly team up with private companies that could no longer rely on financing from commercial banks held back by increased regulation.

“This says something about the future of long-term financing,” he told the Financial Times. “With higher capital requirements, Basel III and the ongoing euro crisis, banks are sometimes not in a position to extend financing – pension funds and sovereign wealth funds are.”

The fund, which has assets of Won350tn, is also expected to help finance anticipated deals involving and Dongwon, which is one of the world’s leading producers of canned tuna. Equity traders believe both to be near completion.

Bankers expect South Korean companies to step up overseas mergers and acquisitions this year, but little attention has been given to the rapidly growing pension fund’s use of public funds to lend firepower to these private companies.

It also stands ready to help fund Dongwon’s acquisition of Spanish tuna company Luis Calvo Sanz. Dongwon has been shortlisted for the deal, which it sees as an opportunity to gain a foothold in the European market. The company is not disclosing what controlling stake it wants but market analysts expect a deal of about USD 200 million.