Korean government tries again to offload Woori stake

There have been several attempts to sell Korea Deposit Insurance Corp's 57% interest in Woori, with auctions for the entire asset failing in 2011 and 2012. A year earlier the sale was broken into several tranches, although 13 parties submitted bids, there was no credible suitor for Woori Bank.

According to auction rules, there must be at least two bidders for the sale of a government-owned stake in a financial institution to go ahead. A consortium led by MBK Partners - which included the Korean Federation of Community Credit Cooperatives (KFCC), Busan Bank, Goldman Sachs and several of MBK's LPs - was thwarted in the 2011 auction because the two other private equity bidders dropped out.

In 2012, the sale failed to attract any preliminary bids as potential buyers one-by-one ruled themselves out of contention.

This is the first attempt at a divestment under the administration of new President Park Geun-hye. According to the Public Funds Oversight Committee, a state-run agency responsible for the sale, the transaction has been structured in three tranches to widen the pool of potential bidders. South Korea has strict rules on the ownership of financial holding companies.

"The focus of the privatization plan this time will be to return Woori quickly to the market in a way that the market wants," Shin Je-yoon, chairman of the Financial Services Commission, told a briefing.

Public notices for the sale of the regional banks - Kwangju Bank and Kyongnam Bank - will go out in July, followed by Woori Investment & Securities in August. The Woori Bank auction is slated for early 2014.

Industry participants doubt whether a private equity firm - domestic or foreign - would ever be permitted to acquire a significant financial asset like Woori, particularly given Lone Star's messy and protracted exit from Korea Exchange Bank. However, it is possible that smaller parts of the business might appeal.

KDIC created Woori in 2001 as part of a government-mandated consolidation of the banking sector, which was still struggling in the aftermath of the Asian financial crisis. It was a temporary solution that has now been in place for more than 10 years. All other significant financial assets that came under government control in the early 2000s have been divested.

KDIC once owned Woori outright but reduced its holding to 57% through an IPO and several block trades. The holding is worth around KRW4.5 trillion at current market prices. As of year-end 2012, Woori had KRW325.7 trillion in assets.

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• Topics
• Financials
• North Asia
• Exits
• Buyouts
• buyout
• Exit
• Financial Services
• South Korea