KDB preparing ‘plan B’ if Daewoo E&C sale fails

The JoongAng Daily reported on Friday (Dec. 18) -

“Although we expect the sale of Daewoo Engineering to go smoothly, KDB, as a main creditor bank, is mulling a ‘plan B’ to prepare for the possible failure of the sale,” KDB Financial Group Chairman Euoo-Sung Min told reporters.

Min said Kumho Group is carefully selecting a final bidder and that KDB is willing to provide financial support to any investor genuinely committed to buying the builder.

Recapping -

• Kumho Asiana Group picked two foreign funds – Jabez Partners and TR America Consortium – as preferred bidders for a controlling stake in Daewoo E&C.
• To help it sell Daewoo, the group asked 18 financial investors to hold off on exercising their right to force Kumho to buy their Daewoo stakes until Jan. 15.

Gov’t to sell Daewoo International by June

The Korea Herald reported Friday (Dec.18) that according to the FSC, Korea’s financial watchdog (pictured), the government will seek to wrap up the sale of Daewoo International Corp. in the first half of next year.

• Creditors of Daewoo International, led by the state-run debt clearer Korea Asset Management Corp., are looking to sell a 68% stake in the company valued at around KRW 2.2 trillion (US$1.87 billion).
• POSCO, South Korea’s leading steelmaker, has expressed its interest in bidding on Daewoo International.

Woori Privatization Mulled via M&A

The Korea Times took a break from the important issues (see ‘Korean Dramas Fail to Appeal to Chinese Men‘ and ‘Girls’ Generation Diet‘) to discuss the possible privatisation of Woori Financial through M&A, based on a report from Financial Services Commission (FSC).

The article states that M&A may be the prefered option to privatise Woori Financial as it will be difficult to find a buyer due to the size of the deal (estimated to be around KRW 7 trillion for the 50% stake).

“A merger would enhance its value and make a sell-off easier,” said FSC Chairman Dong-soo Chin.

If Woori merges with another financial holding company, such as KB or Shinhan Financial,  by swapping shares and setting up a new financial holding company, the government’s stake would be reduced.

However, Byung-yoon Lee from the Korea Institute of Finance warns -

“If banks merge and acquire among themselves, the market concentration rate would rise, and problems associated with oligopoly could also rise…

…if Kookmin, Shinhan or Hana merges with Woori and Korea Exchange Bank, the market share of the top three in the industry would surpass 75 percent.”

Other than through M&A, other options include spliting the stake to sell to a number of buyers, or selling off the holding company’s subsidiaries, to make a reduction in the size of a potential sale.

Hynix Semiconductor Lenders to Accept Bids for Stake by January

On Sunday (Dec. 20) Bloomberg  reported that creditors of Hynix Semiconductor will accept letters of intent from potential bidders for their controlling stake in the world’s second-largest maker of computer-memory chips by Jan. 29.

• The sale arrangers will send out notices to domestic companies tomorrow (Dec. 21), according to the statement released by main lender Korea Exchange Bank (KEB).
• Creditors of Hynix plan to sell all or part of their 28 percent stake, valued at about KRW 3.6 trillion ($3.1 billion) based on Hynix’s closing price on Dec. 18.

“Now is the right time for Hynix’s acquisition and we hope many companies will participate in the sale,” KEB said in the statement.

KEB owns 6.4 percent of Hynix, while Woori Bank has 6.3 percent and Korea Development Bank holds 4.8 percent, while six other financial companies own the remainder.

(Sources: Korea Herald, Korea Times, JoongAng Daily, Bloomberg)