South Korea’s Woori Finance Holdings to be Sold in Three Chunks

South Korea’s Woori Finance Holdings is the largest banking group in the country with assets amounting to 25.7 trillion Won as of 2012. According to regulators, the assets are to be divided into three pieces and sold.

The FSC or Financial Services Commission (FSC) reported that two regional banks are to be the initial offerings, namely Kwangju Bank and Kyongnam Bank. Afterwards, the group’s brokerage unit will be sold off along with other affiliate. The last to be sold is Woori Bank, the flagship. On July 15 a public sale notice will be released for the sale of the two regional banks. The notice for the brokerage units will be released in August.

A whole new strategy

Breaking this deal into three smaller chunks is the latest strategy employed by the South Korean government to finalize the long overdue $3.9 billion sale which is equivalent to 4.5 trillion Korean Won. Parting the deal three ways is a means of lessening the potential buyer’s financial responsibilities. The decision makers also took into account the potential buyer’s preferences.

As soon as possible

Speaking to journalists, the Chairman of the FSC Shin Je-yoon said that the move aims to return the banking group to the market without further delay. He expressed concern that the banking groups value and competitiveness will dwindle as time goes by. Shin also appealed to the National Assembly and the press to help the government in landing a deal at the soonest possible time.

At the wake of the Asian Financial crisis of 1997 to 1998 the government of South Korea bailed out five financial firms. Woori Finance, a holding company was founded in 2001. Korea Deposit Insurance Corp., a state-run outfit used to own the whole company. At present, the South Korean government has a 57% stake in the firm.

Single deal not an option anymore

This is South Korea’s fourth bid, at the wake of three earlier attempts from 2010 to 2012. These former efforts failed because there were no takers when the offer presented was for the whole package. A single deal would land the government around US$3.9 billion based on the closing share price on Tuesday.

KB Financial Group shied away from the bid due to a requirement in South Korean law. A holding firm making the bid for another financial holding company is required to purchase 95% at the least. The not so agreeable public opinion on private equity firms also contributed to the decision of potential buyers to stay away.

The biggest chunk

FSC Chair Shin said that the main objective is to “return Woori Finance to the private sector.” The last and biggest chunk to be offered to buyers is Woori Bank, with the target launching set in January 2014. The FSC hopes that it will be sold within the year.

For analysts, the change in strategy could result in a more favorable response. They also predict a measure of success in this fourth attempt citing political support from the new President of South Korea Park Geun-hye.

Photo Credit: Woori Bank logo