Two bidders say to quit $6 billion Woori sale due to tough terms

SEOUL (BestGrowthStock) – Two consortia vying for the South Korean government’s 57 percent stake worth $6 billion-plus of Woori Finance Holdings (053000.KS: ) said on Monday they would not participate in the auction unless the government loosens sales criteria.

The decision may deal a fresh blow to the protracted Woori sale, which has been complicated due to the sheer size of the deal and the sale of two regional banks which are being offered along with Woori.

The Woori sale would mark the end of South Korea’s efforts to privatize the banking sector after it spent billions of dollars of taxpayers’ money to bail out financial institutions in the wake of 1997-98 financial crisis.

“We note that the government plans to demand a significant premium to the current market value of Woori and wants to have competing bids for at least a 28.5 percent stake,” two bidders

formed by Woori employees and customers said in a joint statement.

“As we are more interested in participating in the Woori privatization, rather than buying a controlling stake in the group, it is difficult for us to pay hefty premium. In addition, there are no other viable bidders aiming to buy the controlling stake except the two consortia, which all would make the auction a failure,” the statement said.

A source close to the consortia said they were considering paying around 2-3 percent premium to Woori’s current share price, while the government is seeking some 10 percent premium to Woori’s book value. Korean banks are mostly trading close to their book values.

“We are not going to participate in the bidding until the government offers a sales guideline which investors can easily accept, especially when there’s no bidder saying they’ll buy a controlling stake,” the source close to Woori said.

The official declined to be named as the government has not announced the official sales criteria.

“There’s no point of us wasting some 20 billion won ($17.5 million) in advisory fees and participating in the bidding,” the two consortia said in a statement.

SECOND ROUND OF BIDDING

South Korea has yet to start the second round of the bidding after it received interest from 11 bidders in the first stage of the sales process.

A person who has direct knowledge of the deal said last week that the second round of bidding may be delayed and miss the end-December target of selecting short-listed bidders, as the government has yet to come up with detailed sales guidelines.

Private equity firm Carlyle Group (CYL.UL: ), Macquarie Group (MQG.AX: ) and MetLife Inc (MET.N: ) are among the 11 bidders who have expressed their interest, according to the person.

“We haven’t sent an official request for the proposal to potential investors to participate in the second round of bidding because the criteria is not ready yet,” said an official at the Korea Deposit Insurance Corp, the largest shareholder of Woori, on Monday.

The official denied that the guideline will ask bidders to pay a hefty premium for taking a controlling stake.

Bidders are asked to take at least 4 percent of Woori and the government is selling two regional banking arms of Woori– Kwangju Bank and Kyungnam Bank.

Shares in Woori closed up 0.7 percent, broadly in line with the wider market’s (.KS11: ) 0.5 percent rise. ($1=1143.0 Won)

(Reporting by Miyoung Kim; Editing by David Chance and Muralikumar Anantharaman)

Two bidders say to quit $6 billion Woori sale due to tough terms