By Kim Tong-hyung
Critics say it’s time the Lee Myung-bak government admits defeat in its attempts to privatize Woori Financial Group and recoup the massive amount of public funds it spent to rescue it in the fallout of the late-1990s financial crisis.
Financial Services Commission (FSC) Chairman Kim Seok-dong will have none of this talk as he vows to hang his legacy as a bureaucrat on successfully finding a suitor for the country’s largest banking group.
Executing a deal of this size would require a serious amount of political fortitude, a quality that is escaping quickly from the lame-duck Lee Myung-bak government as the clock ticks toward the December presidential election. But Kim, ever the opinionated and supremely confident policymaker, claims it will be possible to pull it off within the year.
The Public Fund Oversight Committee (PFOC), headed by Kim, said Sunday it would accept preliminary bids for the government’s 57 percent stake in Woori, valued at around $5.5 billion, through July 27.
The announcement comes weeks after the FSC declared it will make a third attempt to sell Woori, which was rescued by taxpayers’ money. Previous attempts to sell it failed due to a lack interest in 2010 and again last year.
In a meeting with reporters Sunday, Kim stressed that the chance for a successful deal have improved significantly in the past months considering the restored stability in financial markets and rebounding economic activity.
“Market conditions were unfavorable last year, but we pushed the sales process in the spirit that we have to do what we have to do. But the deal is more realistic now. At the very least, I can say that things are looking better than they were last year,” Kim said, claiming of “confirmed” significant interest in Woori among potential investors.
“This is such a deal that might not find an equivalent in the next several decades. Market players can’t afford to look away and will have a tough decision to make whether they get involved in Woori or find other ways to adjust to the slew of changes the deal would bring.” Kim, 59, has said more than once that his current role as FSC chairman will be his last as a public servant. He definitely wants to go out on a high note and finding a new owner for Woori would certainly qualify for just that.
Though chances are still low, Kim’s lastditch attempt has revived the possibility of the Woori sale and has grabbed market attention due to his track record as a troubleshooter.
Kim has played the role of firefighter multiple times when the economy and financial markets fell into trouble. He played key roles in several situations, including the 1997- 1998 financial crisis, the credit card fiasco in 2003, and most recently the savings bank fiasco last year. Kim may believe that this (sale of Woori) is his last task.
In a forum in Seoul last week, Kim said that the government will hold an international auction for the nation’s largest financial company by assets, and that local and foreign investors’ bids will be treated equally.
“While we failed to execute the deal last year, it’s meaningful that we made it to the preliminary bidding process considering the debt problems in southern Europe and other dismal conditions. It was productive that we put everything on the line, exposed and identified the major challenges and gained a better gauge of whether there were any potential suitors that could absorb Woori, what the legal obstacles are, who the potential investors are and the level of interest among other financial holding companies,” he said.
“The overall health of the economy has been strong enough to build an inviting environment for investors. Private equity funds could come into play and they could also bring in quality strategic investors.” Unloading the government stake in Woori will provide an important first step in fulfilling the aspirations to create a “megabank,” a true financial heavyweight that could hold its own against other national champions and be a force in investment banking.
However, building a megabank around Woori will be dependent on finding a new owner with deep pockets and matching ambition. The lack of such a suitor has derailed government attempts to divest of Woori twice and there aren’t many reasons to think that the job will be easier this time around.
While Kim stresses that foreign investors will have a fair shot, the preferable scenario for government officials clearly remains Woori being taken over by Korean companies or investors. The most ideal suitor would be one of rest of the “big four” financial holding companies — KB, Hana or Shinhan.
However, Hana has no room to swallow another industry rival after it has barely digested Korea Exchange Bank (KEB). And Shinhan has shown no interest in expansion that isn’t organic. So all eyes are on KB but its Chairman Euh Yoon-dae keeps denying any interest in Woori.