KDB mulls selling Daewoo Securities to China

By Choi Kyong-ae

The state-run Korea Development Bank will consider an option to sell its controlling stake in KDB Daewoo Securities to a Chinese group as it seeks to find a preferred bidder by the end of this year, people familiar with the matter said Sunday.

“As Chinese companies such as Anbang Insurance and Citic Group have acquired Korean financial companies or shown an interest in them, chances are high that they will join the auction to sell the Korean brokerage company,”said an official from a creditor bank.

China’s insurance giant Anbang completed the process to acquire Tong Yang Life Insurance for 1.13 trillion won ($946 million) last week. Anbang submitted a sole bid in a failed attempt to buy Woori Bank last year.

The official said China’s biggest conglomerate Citic expressed keen interest in the Korean market in March when it discussed financial ties with Samsung Group.

Foreign capital’s foray into the Korean market has been accelerated in recent years due largely to eased regulations and a growing need of mutual ties between financial authorities.

The private equity arm of Japan’s Orix Corp was selected as the preferred bidder in January for a majority 36 percent stake in Hyundai Securities for about 1 trillion won. Hyundai Merchant Marine and others own the 36 percent stake. Taiwan’s Yuanta Securities bought Tong Yang Securities last year.

“If we allow Chinese capital to join the bid for KDB Daewoo, Korean companies will have more opportunities to advance into China’s financial markets regardless of the outcome of Chinese bids,” an industry official said.

The right acquirer, whether from China or not, of KDB Daewoo should be one that focuses on enhancing the value of the brokerage firm.

Analysts say that because there are concerns that a Chinese company may exit from Korea after it absorbs technology and know-how from a Korean company it acquires, KDB needs to make a thorough review when it selects a preferred bidder.

In Korea, KB Financial Group has emerged as a potential bidder for KDB Daewoo. The group said last week acquiring a securities firm would be essential to strengthen its competitiveness, but that it was not planning to submit a bid that went beyond a “proper price.”

The Financial Services Commission, which approves financial deals, said Sunday it may be the right time for KDB to sell the securities firm ahead of rate hikes in the U.S., a further slowdown in China and deteriorating earnings results of Korean companies in the second half.

KDB plans to hold a board meeting on Monday to vote on the sale plan and to hold a press conference at 3 p.m. at its headquarters in Yeoido, western Seoul.

“We have set three major rules for the sale of the brokerage,” a KDB official said. “We are targeting to sell it at the earliest possible time; to sell it for the highest possible price; and to sell it in a way to help promote the domestic capital market.”

According to local reports, KDB plans to sell KDB Daewoo and KDB Asset Management in a packaged deal and KDB Capital in a separate deal. KDB did not confirm the reports.

Next month, KDB plans to name a lead manager to handle the auction and start the process from November.

The deal will collapse if there are not multiple bidders. The value of KDB’s 43 percent Daewoo stake reaches is 1.8 trillion won. KDB Daewoo stock has climbed 19 percent this year through Friday, outperforming the benchmark KOSPI’s 2.1 percent loss.