More investors show interest in Woori stakes
By Kim Tae-gyu
Potential buyers of Woori Bank shares are stepping up preparations to meet the deadline for submitting a letter of intent (LOI) set for 5 p.m. Sept. 23.
Hanwha Life Insurance plans to convene a board meeting Sept. 22 to decide on plans to purchase a stake in the country’s third-largest lender by assets.
The life insurer is expected to make an offer to buy a 4 percent share, the minimum in the block deal set up by the government, which owns the bank through the state-run Korea Deposit Insurance Corp. (KDIC)
“As the second-largest life insurance company here, investing in Woori makes sense as it is expected to boost Hanwha’s bancassurance business,” said an analyst based in Seoul.
“The choice is in tandem with its participation in the creation of the country’s first internet only bank headed by KT.”
The National Pension Service (NPS), which already has a 5 percent share in Woori, will also hold an investment committee meeting Sept. 21 to review the idea of taking part in the block sale.
Other prospective purchasers include Kyobo Life Insurance, KT, Korea Post, Mirae Asset, Korea Investment Holdings and Anbang Insurance Group of China.
Buyout funds are also on the lips of watchers as MBK Partners, Carlyle, Affinity and Baring Private Equity may participate.
However, KT said that the country’s largest fixed-line carrier would not offer an LOI although it will tap into the internet only banking business by setting up K-Bank later this year.
“After collecting the LOIs, we will shortlist the candidates so that they will be able to conduct due diligence,” a KDIC official said. “The final bidding will take place this November to wrap up the sale by the end of the year.”
The government’s ownership in Woori is a legacy of the Asian financial crisis in the late 1990s ― back then, a total of 12.8 trillion won was used to bail out the struggling lender.
Thus far, 8.2 trillion won, or 64.9 percent of the taxpayers’ money, has been retrieved, but the government still has a 51 percent stake in Woori.
Since 2010, the Financial Services Commission (FSC) have unsuccessfully attempted to sell off a 30-percent stake in the bank to a single buyer four times, mostly recently in 2014. As a result, privatization of Woori has been called the biggest state mission in the financial sector.
Last year, the FSC came up with a new format of disposing of the 30 percent stake to multiple investors but it took a year for the financial regulator to actually take advantage of the tool.
This August, the FSC announced that investors should make a bid on stakes in the bank between 4 percent and 8 percent.
Then, they will secure the right to recommend outside directors, thus indirectly affecting management appointments including the CEO, which appears to have been accepted by potential investors both at home and abroad.
Still, the government will remain as the largest shareholder with a 21 percent stake but it hopes to eventually sell this later when the stock price rises with a premium on management control.
“Let’s say that an entity buys 8 percent this time and 21 percent later on. Then, it will hold a 29 percent stake in Woori, which would be big enough to control the bank,” the KDIC official said.
“The share price of Woori appreciated of late because its loan-loss reserves, a significant metric in checking the financial health of any lender, substantially improved and is comparable to other commercial banks.”
Woori netted 307 billion won in profits during the second quarter of the year, up 35.8 percent from the same period in 2015.