UPDATE 2-South Korea cancels $6 bln Woori sale

* S. Korea’s gov’t cancels biggest ever financial sale

* May consider block sale, private contract

* Woori shares end down 0.7 pct, ahead of announcement

(Adds regulator quote, details of announcement)

By Ju-min Park

SEOUL, Dec 17 (BestGrowthStock) – South Korea cancelled on Friday
its biggest ever financial sector privatisation and said it
would consider alternatives including a private contract and
block sale, after two key bidders dropped out.

The scrapped public auction of a $6 billion-plus stake in
Woori Finance Holdings would deal a blow to the
government’s drive to complete its financial sector bailouts
in the wake of the Asian financial crisis in the late 1990s.

“We concluded that it is hard to anticipate the sale of a
controlling stake in Woori via valid competition and
maximization of recovery on the public fund under the
framework initially intended,” said Min Sang-kee,
co-chairperson of the Public Fund Oversight Committee.

Min, however, did not provide a timeline for the
government to restart the sale process with an alternative
method.

The government owns 57 percent of Woori through state-run
Korea Deposit Insurance Corp, after selling a 9 percent stake
in the financial group earlier in April through a $ 1 billion
block deal.

Two consortiums, representing Woori employees and
customers, had been willing to buy the entire 57 percent stake
on offer, but baulked at the hefty premium being asked by the
government.

“As strong contenders pulled out due to their own
situation, uncertainties have risen,” a Financial Services
Commission spokesman quoted Chairman Chin Dong-soo as saying
to local cable network WowTV.

Also, South Korea has dropped the sale of Woori’s two
regional banking units–Kwangju Bank and Kyungnam Bank.

CRITICISM

The suspension of the sale may elicit 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 but the decision would help the government
avoid blame that it is selling cheap.

“I feel sorry that (we) could not live up to the
expectation from the public and the market regardless of the
reason,” Min told a press conference.

The government argues that it needs to ensure a proper
return for the state funds that were invested in Woori Finance
after injecting 12.8 trillion won ($11.08 billion) into Woori
Bank and other financial firms. It clawed back about 5.3
trillion won in bailout funds as of late-June this year.

The two groups that dropped out had been willing to pay a
2-3 percent premium for the entire stake on offer, well below
the 10 percent premium to book value that is the sector
average in recent deals. [ID:nTOE6BC05Q]

South Korea received 11 bids in the first round of public
auction for Woori but most of them want to take minority
stakes rather than the sizeable stake on offer that could
finally end government control of the financial institution.

Among the 11 bidders are Carlyle Group , Macquarie
Group , MetLife Inc and local private funds
Vogo and MBK Partners, according to sources familiar with the
transaction.

Vogo said it aimed to buy a controlling stake but added it
may be tough to meet the government’s “valid competition” rule
which says there must be at least two bidders for Woori,
according to sources. [ID:nTOE6BF00Q]

Shares in Woori ended down 0.7 percent, ahead of the
announcement of the sale cancellation, underperforming the
wider market’s 0.9 percent rise.
($1=1155.0 Won)
(Reporting by Ju-min Park; Editing by David Chance and
Muralikumar Anantharaman)

UPDATE 2-South Korea cancels $6 bln Woori sale