South Korea set a July 27 deadline for preliminary bids to buy a stake in Woori Finance Holdings Co., kicking off the government’s third attempt to unload its holding in the nation’s largest financial company by assets.
Potential buyers must offer for a minimum 30 percent stake in Woori, the Public Fund Oversight Committee, which oversees the companies that have been bailed out by the government, said in a statement today. That would cost at least 2.9 trillion won ($2.6 billion) based on the company’s market value as of April 27, according to data compiled by Bloomberg.
South Korean President Lee Myung Bak, who had pledged to sell state-owned assets and consolidate the nation’s banks, has been unable to lure investors to Woori since the initial attempt in 2010. The government is betting on a rally in global equity markets this year and a legal change that will ease suitors’ cash-payment requirements.
“We’ve seen meaningful changes in the financial-industry environment in the past year and concluded that we can resume our sale efforts,” the committee’s secretary-general Kim Yongbeom told reporters. He expects a preferred bidder to be selected in October.
South Korea’s 60-stock Kospi financial index has gained 6.6 percent this year, while the nation’s benchmark equity gauge has climbed 8.2 percent. The country’s lawmakers this month modified payment rules for acquisitions, allowing bidders to make offers that combine cash and stock and lowering the cash burden for potential buyers.
Shares of Seoul-based Woori, whose businesses include banks, a brokerage and an insurer, fell 0.4 percent to close at 12,000 won in Seoul ahead of the announcement. The stock has advanced 27 percent this year.
Woori won’t be broken up into separate businesses for the sale, according to the statement.
South Korea abandoned an attempt to sell the stake in August after receiving only one bid, led by South Korean private-equity firm MBK Partners Ltd. It canceled the first auction in December 2010.
“It’s hard to see how the sale environment has changed since the two failures,” said Lee Young Seog, a fund manager at Seoul-based Korea Investment Management Co., which oversees the equivalent of about $22 billion. “The government has a strong will toward privatization, but there aren’t many in the market who can afford such a big purchase.”
Woori was created in 2001 as a holding company for banks that the government rescued following the Asian financial crisis in 1997-1998, as part of a push to make the banking industry more competitive.
The government spent 12.8 trillion won to aid Woori and has recouped 5.6 trillion won so far through block sales of shares and dividends. It now owns 57 percent of Woori through state-run Korea Deposit Insurance Corp.
“I’m confident that the market has grown enough to absorb a deal as big as Woori,” Financial Services Commission Chairman Kim Seok Dong told reporters.
Daewoo Securities Co., JPMorgan Chase & Co. and Samsung Securities Co. were hired in September 2010 to help Korea Deposit sell its stake in Woori.