Banks line up for Woori sales

The phased privatisation of parts of the South Korean group, including regional banks and a securities arm, has investment banks signing up to provide advice.
Next year should see the sale of Woori Bank, along with whatever small businesses are not already sold
Next year should see the sale of Woori Bank, along with whatever small businesses are not already sold

South Korea’s M&A market, after a sluggish year, is generating plenty of work for investment banks as the government seeks to privatise Woori Finance Holdings in stages.

This represents the fourth attempt by Seoul in as many years to sell its 57% stake. Instead of trying to sell it as a whole, it will sell its two regional banks first, followed by its brokerage and asset-management affiliates. Assuming the process goes well, this will be followed by selling Woori Bank (and its holding company) next year.

Last month, the government sent out invitations to potential bidders for Kwangju Bank and Kyongnam Bank – the regional banks. JP Morgan and Samsung Securities, which had advised the government on the sale of Woori Finance in previous attempts, are representing the government.

At least two regional banks are bidding for Kwangju and Kyongnam. Daegu Bank, a unit of DGB Holding Company, is being advised by Goldman Sachs for a potential bid, while Busan Bank is another potential buyer, and has appointed Credit Suisse.

Both Daegu and Busan are from the same region as Kyongnam Bank, in heavily industrialised south-eastern Korea. Meanwhile, Kwangju is the largest city in Cholla, the south-western-most province of the country, with a distinct rural culture – and therefore terra incognito for banks from other regions. It is not clear at this stage whether both Kwangju and Kyongnam banks will go to a single bidder, or if they will be sold separately. Kyongnam Bank is assumed to be of greater interest to the bidders.

Given the capital requirements of a successful acquisition, bankers believe either Daegu or Busan may form consortia with private equity interests.

In last year’s attempt to sell Woori Finance, China’s ICBC emerged as a potential bidder for the regional banks, but it has so far not got involved in this year’s process.

This month the government requested bids for Woori Investment & Securities, along with five smaller related businesses, including asset management, credit cards and leasing. Citi has been appointed advisor on the sell side. Two potential buyers are said by bankers in Seoul to be preparing bids: KB Financial Group and Nonghyup Financial Group. They have yet to appoint advisors. More bidders may emerge as Citi begins to shop the asset around, with an October 21 deadline for non-binding bid submissions.

Previous bidders for Woori Finance, such as Kyobo Life Insurance, have not put their hat in the ring for the securities business. However, Kyobo Life is a potential buyer of the bank, as are Shinhan Financial Group and Hana Financial Group, along with KB and Nonghyup Financial (a unit of the National Agricultural Cooperative Federation).

Finally, next year should see the sale of Woori Bank, along with whatever small businesses are not already sold. Although JP Morgan and Samsung acted in previous privatisation attempts as advisors, this time according to a banker, the government has indicated it will appoint Woori Investment and Securities to represent the seller. More details will emerge once the smaller deals are consummated.


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