The Korean government has sold a 7% stake in Woori Finance Holdings after a share placement last night was increased beyond what was initially indicated to W863.3 billion ($745 million). Woori Finance is the largest financial holding company in Korea and the owner of Woori Bank.
According to a term sheet, Korea Deposit Insurance Corp (KDIC), which prior to this sale held a 73% stake in Woori on behalf of the government, offered to sell approximately 32.24 million Woori shares, or a 4% stake in the company, with an option to upsize by 25% to 40.3 million shares. If that option had been exercised in full, the total deal size would have accounted for 5% of Woori's outstanding share capital.
However, supported by an upbeat trading session in European equity markets, strong demand from both international and domestic investors allowed the deal to be increased by 74.4% to 56.24 million shares. By doing this, KDIC has removed an overhang that would otherwise have been likely to hover over the stock after the placement since the state agency did say a few weeks ago that it intended to sell a 7% stake in Woori as part of ongoing efforts to privatise some government-owned assets. According to the term sheet, KDIC would have been locked up for 90 days following the placement, which could easily have led to a dip in Woori's share price around the time of the lockup expiry.
The block was offered and sold at a fixed price of W15,350 per share, which equalled a 4.36% discount versus yesterday's closing price of W16,050. The transaction, which was launched on the back of a 1.8% drop in Woori's share price yesterday, is the second largest block trade in Korea this year after Royal Philips Electronics' $794 million sell-down of its remaining stake in LG Display in March.
According to a source, the four joint bookrunners -- Citi, UBS, Samsung Securities and Woori Investment & Securities -- felt that the demand was strong enough to allow for the large size increase, and noted that while the top accounts in the book would have gotten about three-quarters of their orders filled, the orders at the tail end was scaled back significantly more. There was no information last night on the overall size of the demand, but about 150 investors were said to have participated in the deal, which was kept open for about six hours after the close of Korean trading yesterday.
About 75% of the demand was Asia-based, with approximately two-thirds coming from domestic Korean investors. Most of the remaining interest was generated out of Europe, although a small number of onshore US investors also came into the deal. The allocation was expected to favour international investors, leaving them with slightly more than one-third of the deal.
Woori's share price has tripled over the past 12 months and the stock is currently trading only 5.3% below its 2009 high of W16,950, which it hit in mid-September. Analysts are divided on whether there is more upside to be had, although only three of 31 analysts recommend investors to sell. Among the rest, 14 still have a "buy" recommendation on the stock, while 14 have a "hold".
KDIC last sold shares in Woori in June 2007 when the share price was hovering around W23,000. At that time, the state agency offloaded a 5% stake, fetching $990 million.