KDIC sells 5% of Woori Finance

The long-awaited transaction is expected to be priced at the top of the range for a total deal size of $990 million.
Korea Deposit Insurance Corporation, or KDIC, last night finally offloaded another 5% of its shareholding in Woori Finance Holdings, taking advantage of a strong day in the market for Korean financial stocks.

Woori, which has hovered in a range between W21,700 and W24,000 per share over the past 3.5 months, jumped 4.8% to W23,000, while Shinhan Group added 4.4% and Kookmin Bank was up 3.9%. The sector gained partly on news that the financial regulator is planning to issue more brokerage licenses, making it easier for banks to establish a presence in the securities market. The benchmark Kospi index edged 0.5% higher to its fourth straight record close.

KDIC hadnÆt signed off on the final price in the early hours of this morning, but sources say all the indications were that the transaction would be priced at the top of the offering range at W22,750 for a tight 1.1% discount to yesterdayÆs (June 20) close. In fact there was no reason not to do so with the deal well over five times covered.

The government agency sold 40.3 million shares, which at the top of the W22,200 to W22,750 range gives a deal size of W916.8 billion ($990 million). This is the second largest equity transaction in Korea this year after KDICÆs own $1.2 billion sell-down of Shinhan Financial Group in February. However, no less than 88.5% of that deal went to a group of 17 strategic investors, leaving only a small portion to be placed in the market.

The Woori deal comes at a time when domestic institutions are becoming more positive about Korean financial stocks. Most of them are still underweight the sector, however, and are now trying to add to their positions. Not surprisingly, therefore, domestic demand accounted for more than half the total order amount, although that was expected to include a certain degree of inflated interest.

Sources close to the deal say KDIC had indicated a wish for a 50-50 allocation between domestic and international investors. The international book contained many Korean specialists who either are shareholders of Woori at the moment or have been at some point in the past, as well as the usual mix of investors you see in high-quality names.

The interest in Woori has picked up over the past couple of sessions after the local media reported that the national pension fund may take a stake in the company and. Wholly-owned subsidiary Woori Bank earlier this month also won approval to become incorporated in China. This will allow it to set up a unit in the Mainland and to offer services in renminbi.

Woori, which is the third largest financial services firm in Korea, trades at discount to its financial sector peers on a price to book basis, which makes this a good time to buy for investors who are positive on the Korean economy and the banking sector.

According to a source, Woori trades at 1.5 times its current book value, compared with 1.6 to 1.8 times for Kookmin and Shinhan. The stock is also up only about 7% year-to-date, while the Kospi index has risen 24.4%.

The offering was jointly led by Credit Suisse, Lehman Brothers, Samsung Securities and Korea Investment & Securities. Aside from the last one, these are the same bookrunners that arrange the companyÆs $250 million ADR in September 2004, which was also backed by secondary shares held by KDIC. Dongwon joined the trio as bookrunner for the 2004 deal.

Given how long it has taken the government to sell this small 5% holding, observers say it is unlikely that the transaction will trigger a wave of big sell-downs. However, KDIC is expected to offload part of its stake in Korea Electric Power Corp. in the near term. In the medium term, more sales of Woori shares are also expected, they say.
¬ Haymarket Media Limited. All rights reserved.
Share our publication on social media
Share our publication on social media