Scenarios: What next for S.Korea’s $6 biliion Woori sale?

By Miyoung Kim

SEOUL (BestGrowthStock) – South Korea may have to suspend its proposed $6 billion-plus stake sale in Woori Finance Holdings (053000.KS: ) after two strong candidates decided to pull out, demanding the government ease sales criteria.

The government is set to decide whether to suspend the sale within weeks to remove market uncertainty over the country’s biggest ever financial transaction, a source who has direct knowledge of the matter said. (ID:TOE6BE050: )

Here are some scenarios that could play out in the coming days.


This is seen as a likely outcome. South Korea could suspend the Woori sale, which drew 11 bidders in the first round of auction, because the bidders that pulled out, formed by Woori employees and customers, are the only ones willing to buy the government’s entire 57 percent stake.

The other bidders are interested in taking minority shares, which will fail to meet the government’s goal to turn Woori management back to the private sector.

Kim Hong-dall, managing director at Woori and in charge of one of the two bidders who dropped out, said they are willing to pay 2-3 percent premium to Woori, well below 10 percent premium to book value, which is the sector’s industry average in recent deals.

A suspension will draw criticism that the government still owns a private bank more than a decade after it took control of the firm by pouring in billions of dollars of taxpayers’ money in the wake of 1997-98 financial crisis, but the decision will help the government avoid blame that it is selling cheap.

Financial Services Commission chief Chin Dong-soo said on Wednesday that maximizing the investment returns of its public fund remains the most important criteria in the Woori sale, suggesting the government may suspend the sale until a strong buyer emerges.


This is also seen as a possibility. South Korea could drop the Woori auction but go ahead with the sale of its two regional banks, as the two banks received strong interest from 13 bidders.

The sale of Kwangju Bank and Kyungnam Bank, both owned by Woori, will also shrink the size of Woori and make a future Woori sale more digestible.

South Korea may also use its stake in Woori to restructure the banking sector later by encouraging it to merge with a local lender, as it has said the country will grow the sector to have “mega” banks.

Woori may be asked to merge with KB Financial Group (105560.KS: ), the parent group of the country’s top lender Kookmin Bank. The combination of the two will create a bank with assets of around 660 trillion won.


In what is seen as a less likely option, Korea may go ahead with its sales plan with the remaining bidders and sell half of the government’s 57 percent stake, which will make Woori more digestible.

The sheer size of $6 billion plus deal and the auction of two regional banks offered along with Woori has made it difficult for the government to attract competitive bids.

Remaining bidders, predominantly private equity houses, could partner with each other to leverage up their chance of winning, but they are subject to tough scrutiny by regulators over their qualification as a major shareholder of a Korean financial institution.

Among the 11 bidders are Carlyle Group (CYL.UL: ), Macquarie Group (MQG.AX: ), MetLife Inc (MET.N: ) and local private funds Vogo and MBK Partners, according to sources. (Editing by Muralikumar Anantharaman)

Scenarios: What next for S.Korea’s $6 biliion Woori sale?