According to Reuters, the financial regulators in charge of the privatization stated on August 17 that the decision to continue or abandon the sale will be made on Friday, August 19. Financial experts suspect the deal will fall through, making this the second failed attempt to find a private owner for the country’s biggest banking group by assets, with last year’s attempt also failing to draw sufficient interest.

Though government officials, spurred on by President Lee Myung Bak, have been aiming to privatize companies that were bailed out more than a decade ago, the second attempted Woori sale received only one bidder due to the recent steep declines in world markets and public criticism of the role of private equity funds.

According to the Wall Street Journal, the two other private equity firms that had been expected to bid, Vogo Fund and TStone Corp., said separately that they didn’t do so because of deteriorating capital-market conditions.

Politicians have also said that selling to a consortium led by a private-equity fund won’t help develop the local financial industry. Critics say Woori Finance would just be put up for sale again in a few years as the goal of a private-equity fund is to make a profit.

Private equity firms have also been reluctant to participate in the sale, for fear of hold-up situations like those of Texas-based Lone Star Funds. Lone Star has been trying to sell Korea Exchange Bank for years, but has been dogged by lawsuits and by public hostility toward foreign private equity funds that bought Korean assets cheaply in the wake of the 1998 financial crisis.

Thus, the sale is likely to be scrapped once again, as regulators want to see offers from more than two bidders to show South Korean voters that the government had sought to get value for taxpayer money.

Woori shares recently rebounded from an almost a two-year low as world stock markets slumped, and on August 17 its shares rose 1.3 percent to 12,100 won ($11.30)outperforming a 0.68 percent rally on the wider KOSPI index.

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Unfortunately, the Woori sale may still face further setbacks, as Bloomberg has reported that analysts have doubts that the local funds will be able to fund the purchase. The KDIC’s total 57 percent stake is valued at 6.3 trillion won ($5.9 billion) based on the share price from June 29.

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JoongAng Daily reported that, at a National Assembly committee hearing on June 14, FSC Chairman Kim Seok-dong said the government barred KDB from making a bid due to “the current lack of public consensus” about KDB’s participation.

This new development in the ongoing Woori saga will increase the likelihood that the FSC will get approval for their legislative amendment for easing bank ownership. Now that a KDB-Woori merger is out of the picture, the regulators are free from the fierce public opposition that surrounded the sale.

The FSC chairman also emphasized that the privatization of Woori Finance is not only about recovering public funds, but also about the creation of a large banking institution that would help develop the domestic industry. He added that the Woori sale is still open to all local and foreign bidders other than KDB.

Unfortunately, no other bidder has shown interest in the sale. KB Financial Group was once considering the purchase, but has withdrawn from the running, explaining that a merger between the two companies would be undesirable.

The KDIC will be accepting LOIs until June 29.

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In a press release on May 17, the Financial Services Commission stated their general plan for the sale.

Firstly, they aim to uphold three main principles in this deal; the maximization of the recovery of public funds, the quick resolution of the privatization process, and contribution to the development of the domestic financial sector.

Secondly, in the interest of simplifying the sales procedure and minimizing any uncertainties in the process, the FSC has decided to sell Woori with all ten of its subsidiaries.

Thirdly, the regulators set the minimum bid to 30 percent of the group’s total share. This is to assure that bids will be placed with the intention of purchasing the controlling stake.

Lastly, the MOU that gives KDIC governance of Woori will be either cancelled or alleviated, depending on the reduction of KDIC’s stake.

As the year before, the sale process will include preliminary and final bids. The sale is allowed to take any form of acquisition or merger. LOIs will be accepted until June 29.

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“KDB Financial Group submitted a document for the bidding to the Financial Services Commission (FSC),” Kang Man-soo, Chairman of KDB Financial Group said in an interview with Maeil Business Newspaper on Thursday.

Plans about privatization of Woori Financial Group and schedules for the sale will be announced within the month at the earliest. FSC Chairman Kim Seok-dong has already made it official that a roadmap for privatization of one of the country’s big holding companies will be unveiled in the first half of the year.

“The FSC’s committee on public fund management held a meeting over privatization plans on April 29th, and even discussed announcing the start of the sale bidding,” an official from the committee said.

“The announcement has been moved to a later date, because there have been too many issues going on in the financial sector, including the crisis of savings banks,” a high-ranking official in the financial sector said.

Last December, the government was forced to halt the privatization of Woori due to a lack of interested buyers for the estimated $6 billion deal. The government earlier said it planned to launch a new attempt to sell Woori in the second quarter of this year.

There have been suggestions that it might also separate Woori Investment & Securities from the parent group and merge it with Daewoo Securities.

Banking analysts said that there is some market opposition to the merger of two state-run financial groups since it would defeat the purpose of privatization.

However, on Friday the Joongang Daily reported that KDB Financial Group said yesterday it was “undecided” on whether to bid for Woori.

Sources: Joongang Daily, Maeil Business

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This statement was in response to speculation that some foreign financial groups might be interested in buying Korean savings banks.

“I don’t exactly know who wants to acquire our savings banks, but we will let them do it within our rules. At least when I am serving my term, they [foreign firms] will not be discriminated against in the Korean market,” Kim told a meeting of foreign correspondents.

Kim also commented that the privatization of Woori Financial Group will be carried out this year, stating -

“I am not going to leave [Woori Financial] the way it is now.”

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Lee Pal-sung, who was re-appointed as the president at the holding company, said in a telephone interview with the paper that Woori Investment & Securities is a cash cow for the group and Woori Finance has no plan to sell the subsidiary separately in the privatization of Woori Finance. Instead, Woori Finance will increase its stake in Woori Investment & Securities up to 50%, from current level of 35%, Lee noted.

The report also cited Lee as saying that he plans to spin off the insurance unit and rental unit of the group into seperate entities and grow them via acquisitions.

Source: Wow TV (translated)

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During a media conference on Friday [17 December 2010], Min said that the committee will suspend the privatization procedure for a while and will resume it later after resetting the sale conditions.

Woori Finance is a listed South Korean financial holding company, in which the state-run Korea Deposit Insurance Corporation (KDIC) is seeking to sell a 57% stake via a competitive bidding process.

Min said that the main reason for suspending the sale is the committee’s wish to ensure a valid competition structure. The committee will review the privatization conditions, and renew or add a new sale method to finish the privatization as early as possible. Min was cited as saying that the committee will also consider a block sale as an option.

The sales of Kyongnam Bank and Kwangju Bank were also canceled, the item noted.

As reported earlier, KDIC put a controlling stake in Woori Finance and two privately-held regional banks owned by Woori up for sale. Woori Finance has a market cap of KRW 11.7tn (USD 10.2bn).

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The report cited an unspecified insider at the private equity fund as saying that the fund will make a bid aiming to acquire the management rights in Woori, and plans to acquire 35%~40% stake in the listed South Korean financial firm.

According to an earlier report, the government may delay the sale indefinitely since the consortia of Woori Finance had declared that it would not bid unless the seller eases the criteria for privatization because there could not be a bidder other than the consortia to bid for a controlling stake.

Meanwhile, the South Korean government is likely not to relieve the sale criteria upon request of the consortia of Woori, according to a report in Financial News Daily. The report highlighted a comment of Jin Dong-soo, the head of Financial Services Commission, that the most important goal in the privatization of Woori is maximizing returns. The report explained that the comment means it could not accept the request of the consortia to ease the criteria in the sale which will make the sale process competitive.

As reported earlier, KDIC had put a controlling stake in Woori Finance and two privately held regional banks owned by Woori up for sale. Woori Finance has a market cap of KRW 11.6tn (USD 10.17bn).

Source: Korea Economic Daily (translated)

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The report cited an insider at Public Fund Oversight Committee as saying that two to three Chinese banks have requested sell-side advisor a teaser letter in the sale. Public Fund Oversight Committee is a government organization that is in charge of the privatization of Woori Finance, the listed South Korean financial company. According to the report, two to three European banks have also requested the guideline document.

Meanwhile, Daegu Bank, a potential bidder for Kyongnam Bank and Kwangju Bank of Woori, has mandated a consortium of UBS and Goldman Sachs as the financial advisors for the potential acquisition. The report disclosed this information without citing a source.

The unsourced part of the report also revealed that a consortium led by The Kyongnam Chamber of Commerce & Industry will join the race to acquire Kyongnam Bank. The consortium has signed an agreement with an individual Korean-Japanese investor to raise KRW 280bn (USD 247m) as a part of a financing plan for the potential acquisition, it added.

As reported earlier, the South Korean government has announced the sale of Woori Finance and its subsidiaries, Kyongnam Bank and Kwangju Bank.

Source: Seoul Economic Daily

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