Korean government delays Woori sale

Chin Dong Soo, chairman of the Financial Services Commission, said the government was evaluating the impact of macro issues, such as the European sovereign dept crisis, on the sale of the $6 billion, 57% stake in Woori held by state-owned Korea Deposit Insurance Corp. However, one of the major factors in the decision to delay appears to be the ongoing sale of Lone Star Funds’ 51% stake in Korea Exchange Bank. Chin said that some key details will be announced mid-July, but the government has yet to announce a lead manager for the sale let alone begin evaluating bidders, which are said to include Blackstone and other PE shops.

“Clearly the Korean government wants to maximize the value for Woori,” Jong Han Kim, Partner in the Corporate Department at Paul Hastings, told AVCJ. “They don’t want to be put in a place where they have to compete with KEB.”

Other sources emphasize that the government will likely look to sell off tranches rather than transfer control to a single investor, but certain units, such as Woori Investment & Securities and two provincial banks, Kwangju Bank and Kyongnam Bank, may be sold whole.

Rumors surrounding the deal come on the back of a public declaration by Euh Yoon Dae, chairman-designate of leading lender Kookmin Bank, that his group has no plans to make a major strategic acquisition for the next two years. Euh, AVCJ sources explained, is close to the new President of South Korea, Lee Myung Bak, and presumably party to the government’s privatization strategy for Woori.

The new Korean administration’s ultimate game plan is to build a regional champion, with scale and resources to compete internationally. However, some Korean sources state that the delays in the Woori privatization are partly due to disagreements over this agenda. KB’s Euh is a strong advocate of this view, and his pronouncements may be an attempt to drive down the price of Woori prior to a deal.

“KB is a giant bank with resources to make the KEB acquisition; there have also been rumors of a possible merger with Woori Bank,” noted Kim. “When you have a giant potential buyer with capital and you take that out of the game, it makes things a little more complicated.”

Kim also confirmed that the political climate is right. “It’s a good time for Lone Star to get out,” he said. “Finally you have a president of the Republic who’s very pro-business and pro-America. This is the time to get out, rather than next year. Who knows what’s going to happen?” 

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• Topics
• Financials
• Exits
• Buyouts
• North Asia
• Regulation
• Lone Star Funds
• The Blackstone Group