Korea Gets No Initial Bids for Stake in Woori Finance
South Korea’s third attempt to sell Woori Finance Holdings Co. (053000) failed after the government received no initial bids for its $4.3 billion stake in the country’s biggest financial group by assets.
No parties submitted preliminary bids for the government’s 57 percent stake by a 5 p.m. deadline yesterday, the Korea Deposit Insurance Corp. said in an e-mailed statement. Two previous efforts to sell Woori in the past two years collapsed due to lack of investor interest.
The failure is a setback for President Lee Myung Bak in his push to consolidate South Korea’s financial companies and make them globally competitive before leaving office in February. Profit prospects for banks are waning as the economic slowdown forces them to set aside more cash for bad loans and the central bank cuts interest rates to spur growth.
“The result was widely expected,” said Choi Jung Wook, a Seoul-based analyst at Daishin Securities Co. “It would have been tough for a buyer to overcome strong opposition from politicians and workers. The next attempt is likely to come way after the new president’s inauguration in February.”
Shares of Woori rose 3.9 percent to 10,700 won at the close of trading in Seoul yesterday before the deadline, valuing the government’s holding at 4.92 trillion won ($4.3 billion). The benchmark Kospi (KOSPI) index gained 2.6 percent.
KB Financial Group Inc. (105560), whose Chairman Euh Yoon Dae expressed interest in Woori earlier this month, confirmed that it didn’t join the race, according to a regulatory filing. Kyobo Life Insurance Co. said it decided not to take part, though it may consider a potential future bidding round.
The Public Fund Oversight Committee, which is leading the sale of Woori and other firms bailed out with taxpayers’ money, will meet on Aug. 2 to discuss future steps, the Financial Services Commission said.
“It’s regrettable we had to halt this sale process without results,” the regulator said in an e-mailed statement yesterday. “Considering the current environment, it would be difficult to resume the sale process in the near future.”
FSC Chairman Kim Seok Dong, the top government official who’s helming the Woori sale, told lawmakers on July 26 that a fast privatization is necessary for Woori to recover its competitiveness and it’s time for the public to recoup taxpayers’ money spent more than a decade ago.
Woori was created in 2001 as a holding company for banks rescued by the government 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 share sales and dividends.
Bidders were required to buy more than 30 percent of Woori and the government will sell the group together, the Public Fund Oversight Committee said in April. Daewoo Securities Co. (006800), JPMorgan Chase & Co. (JPM) and Samsung Securities Co. were hired in September 2010 to help Korea Deposit sell its stake.
President Lee, former chief executive officer of the nation’s largest construction firm, was elected in a landslide in 2007 on pledges to deregulate and sell firms bailed out following the Asian crisis. Lee’s single five-year term ends in February and he can’t run again according to constitutional law.
Park Geun Hye, a ruling New Frontier Party lawmaker who leads opinion polls ahead of the December presidential election, said on July 16 that the Woori sale should be left to the next administration.
The Korean Financial Industry Union, which includes bank workers from Woori and KB Financial, said yesterday it plans to proceed with its first nationwide strike in more than a decade on July 30 to protest against a Woori sale. The union said the government should sell the stake publicly to individual investors rather than pursue consolidation with other firms.
Bank workers will extend the strike if demands including better job security and higher wages aren’t met, the union said on July 13.
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