Korean government’s Woori Bank sale flounders again

Korea Deposit Insurance Corp. (KDIC) holds a 57% interest in Woori Finance Holdings, worth around KRW4.6 trillion ($4.1 billion) at current market prices. Efforts to divest it have floundered over the sale of the group's flagship asset, Woori Bank. The latest process fell through because there were not enough bidders - only China's Anbang Property & Casualty Insurance submitted an offer.

KDIC tried to stimulate interest by offering to sell smaller interest in Woori Bank in addition to a 30% controlling stake. While there was interest in the smaller stakes, Anbang had no competitors for the larger piece.

"There is no change in the government's stance of privatizing Woori Bank at an early date," said an official at the Financial Services Commission, Yonhap News Agency reported. "The government is weighing pushing for an auction next year by coming up with a new sale plan."

Having previously tried to sell the Woori Finance stake in one go, this time the government divided the auction into three parts: two regional banks; brokerage Woori Investment & Securities in a package deal with an asset management unit, a savings bank and a joint venture life insurance business, and then debt investment unit Woori F&I and leasing business Woori Financial; and finally Woori Bank.

Several private equity firms participated in the second part of the auction, with The Carlyle Group, Hahn & Co. and IMM Private Equity said to be among 10 bidders for Woori F&I. Seoul-based private equity firm Pine Street Group made an offer for the Woori Investment & Securities package.

Woori was created by Korea Deposit Insurance Corp. 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 government is said to have recouped total proceeds of KRW8.6 trillion from Woori Finance Holdings, having bailed out the group to the tune of more than $12 billion.

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 was thwarted in the 2011 auction of the Woori Finance Holdings interest because the two other bidders dropped out. Another sale in 2012 failed to attract any preliminary bids.

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