Is Kim Seok-dong daydreaming?

By Kim Tong-hyung

Korea’s three big financial groups Wednesday reacted coolly to a plea by Financial Services Commission (FSC) Chairman Kim Seok-dong to join a bid for Woori Financial and help the government unload its controlling stake.

``You won’t have to worry at all whether a productive competition would be possible,’’ Kim said. ``(The major banking groups) aren’t talking about their intentions to acquire Woori because that would achieve nothing except push up the price tag.’’

Financial industry heavyweights like KB Financial, which competes with Woori in size, and Shinhan Financial, the most profitable among the top four banking groups, have been stressing they won’t consider Woori unless it’s carved into pieces. KB in particular has expressed interest in Woori’s brokerage unit, but not the whole package.

However, the FSC is standing firm on Woori being sold in one block as it required bidders to buy at least 30 percent of the group or seek a merger with it. The clock is ticking as bidders must submit their initial buying interest by June 29.

An interesting player in this picture could be Hana Financial, the country’s fourth-largest banking group, which has invested Herculean efforts to acquire the Korea Exchange Bank (KEB) from the Texas-based Lone Star Funds. Before it went for KEB, Hana had an interest in Woori and was regarded as a favorite among potential suitors.

Hana signed a $4.1 billion contract to take over KEB from Lone Star Funds in December last year.

However, the fate of the deal became precarious after March when the Supreme Court overturned the acquittal of Paul Yoo, Lone Star’s former head of Korean operations, over stock price manipulation, and sent the case back to a lower court. This triggered a deafening debate over Lone Star’s eligibility as KEB’s largest shareholder.

According to a senior banking industry official, FSC officials are determined to let the Hana-Lone Star deal go through, but are reluctant to move before the Seoul High Court announces its ruling.

The debate over Lone Star’s eligibility is linked to lengthy arguments on whether financial authorities in 2003 should have ruled the buyout firm as a non-financial investor and thus prevented it from buying more than 9 percent of KEB instead of the 51 percent it acquired.

According to the banking industry source, FSC officials now seem to be thinking that declaring Lone Star as a non-financial investor now, which will lead to a forced sale of shares, could be an ironic relief to headaches of everyone involved.

Financial authorities would be able to save face by defusing some of the criticism about their supervisory failures, Hana would be getting the bank it wanted, and Lone Star would be walking off with a big paycheck.

The country pumped 12.8 trillion won (about $11.8 billion) in taxpayers’ money into Woori to rescue the company in the aftermath of the late-1990s Asian financial crisis. The government halted the sale of its 56.96 percent stake in Woori last December after failing to find buyers capable of acquiring a controlling interest in the company.