S. Korea announces Woori Finance privitization plan

South Korea on Friday announced its plan to process a major stake sale in Woori Finance Holdings Co., kicking off the long-held privatization of the state-held financial company.

PRIVATIZATION PLAN

The Public Fund Oversight Committee said it reached a decision either to unload "a certain amount of share or more" in Woori Finance or to have it merged with other financial firms.

Although the committee said it will later finalize the amount of shares to unload, market observers expected the government will sell around a 28 percent stake, which will revise down the state stake to below 30 percent from its current 57 percent stake.

The plan comes with a separate deal of selling controlling stakes of 50 percent plus one share in the two regional banks, Kyongnam Bank and Kwangju Bank, the committee also said, hoping it would lower costs.

On the other hand, Woori Investment and Securities, Woori's affiliate asset manager, will be included in the privatization deal, as the government seeks to create a synergy with its flagship Woori Bank.

Upon the stake sale, the government aims at maximizing the amount of fund it retrieves from the company, privatizing it at an early date, and contributing to the progress of the banking sector, the committee said in a statement.

According to the statement, the committee said it will hold an open bidding for domestic and overseas investors, to which it hopes to draw as many participants as possible.

The committee plans to pick a preferred bidder by the end of the first quarter and to close the deal by no later than the first half of next year.

The sale process will begin next week, when the committee selects two local and one foreign brokerages as main managers, who will discuss details including how much share should be sold and how.

Although it is not yet known how the sale process will be conducted, the committee is firm in that the remaining stake should be below the 30 percent-level after the sale.

"With the state stake reduced to below the 30 percent level, we will be able to say that it has been privatized enough," Min Sang-kee, co-chief of the committee, told a press conference.

With the committee eying both options of unloading shares and going through a merger and acquisition (M&A), however, market observers are heavily weighing an M&A with a peer financial company.

While the government may welcome the idea as it can curtail the sale process, it is a viable option to the potential bidder as well as it does not place too much a financial burden on the acquirer if realized through stock swaps.

The government took over Woori Finance in 1998 after injecting 12.8 trillion won (10.8 billion U.S. dollars) in public funds to bail out Woori Bank and its peers that later consolidated into the holding company.

The state-run Korea Deposit Insurance Co., a state agency, has been holding its stake, slashing its stake to 57 percent through Woori Finance's initial public offering in 2002 and four rounds of block sale.

CHANGE IN BANKING LANDSCAPE

With the No. 2 financial company out for sale, leading financial institutions have shown interest in acquiring the company.

The Woori Finance sale has long been a hot issue in the financial market an M&A with the company may pull up the acquirer' s position to the top rank.

Euh Yoon-dae, chief of South Korea's financial leader KB Financial Group, said upon his appointment as the head of the group that he is having a thought on acquiring Woori as the group seeks to become a megabank.

However, later he reversed his earlier remarks saying there would be no mergers and acquisitions until KB Financial becomes healthier.

South Korea's No. 4 bank Hana Financial Group Inc. is also known to have shown interest in the Woori M&A.

With the deal is looming the debate of a mega bank creation, despite a global move to regulate banking sectors in the wake of the financial crisis.

In South Korea, however, it is widely discussed that there is a need for a large-size financial company in order to nurture a globally competitive lender.

With various debates revolving around the deal, shares of Woori Finance ended trading at 14,700 won (12.4 U.S. dollars), down 3.92 percent from the previous session.

Source: Xinhua