Korea’s Woori sale fails yet again as no bidders materialize
The South Korean government’s latest attempt to exit its controlling stake in Woori Finance Holdings has failed after no one submitted a preliminary bid. The country’s financial regulator subsequently said “it would be difficult to mount another attempt to sell Woori in the near future,” which appears to rule out any chance that President Lee Myung-bak might resolve the issue before his term ends early next year.
Last week an assortment of potential buyers ruled themselves out, Reuters reported. KB Financial Group bowed out on Wednesday and Kyobo Life Insurance followed suit on Friday. The Korean Federation of Community Credit Cooperatives (KFCC), which partnered with MBK Partners on a failed bid last year, also said it wouldn't participate.
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. The MBK-led consortium - which included Busan Bank, Goldman Sachs and several of the private equity firm's LPs in addition to KFCC - was unable to secure the Woori stake last year because Tstone Corp. and Vogo Investment dropped out of the process.
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, strategic buyers are thin on the ground. Some analysts blame this on political uncertainty ahead of the upcoming presidential election, but the reality is that few domestic players have the resources to take on such a deal.
Woori is one of the last financial sector assets that remains in government hands from the era of massive bailouts and restructurings that followed the Asian financial crisis. Korea Deposit Insurance Corp. (KDIC) took control of the group, the country's largest financial holding company by assets, in 2001. Although there have been a few block sales of shares that saw the stake fall to 57%, attempts at a full exit have failed.
The most recent attempt was announced in May, with prospective buyers required to bid for at least 30% of the company. Based on Woori's market value at the time, the deal would have been worth at least KRW2.9 trillion ($2.6 billion). Previous efforts to sell off the company in tranches rather than to a single investor have also floundered.
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