* Controlling stake of 30 pct worth around $3 bln -analysts
* Authorities don't expect huge demand for the stake
* Preferred bidders to be chosen by year-end
(Adds comments on bidding outlook)
By Joyce Lee
SEOUL, June 23 South Korea will split the sale
of its 57 percent stake in Woori Bank, the country's
second-largest bank, into two tranches with the largest portion
- an offering of 30 percent - seen worth roughly $3 billion.
The 30 percent holding would convey management control but
the outlook for a robust bidding process is weak, with only
Kyobo Life Insurance, the country's third-largest
insurer, having publicly flagged interest in a controlling stake
Woori Bank is the crown jewel in Woori Finance Holdings
, accounting for 70 percent of its assets. Its sale
is the last and most important leg of the government's attempt
to recoup as much as possible of more than $12 billion used to
bail out the financial group over a decade ago.
But selling off its assets has been a complicated and drawn
out affair as South Korea requires at least two bidders for a
government sale by law, and as foreign investors are reluctant
to enter a market seen as having poor returns and difficult to
"Because the financial and banking sectors are in a
difficult situation, it's not a situation where we can generally
expect massive demand," said Park Sang-yong, chairman of the
Public Funds Oversight Committee in charge of recouping bailout
"It's hard to tell at the moment...another bidder could
emerge in the next 5-6 months," Park said.
Woori Bank, which has become a big corporate lender under
the state ownership, saw operating profit slide by almost a
third to 464 billion won ($455 million) in 2013, hit hard by
failures of units owned by cash-strapped local conglomerates.
South Korea's National Pension Service, the world's
fourth-largest pension fund, and other investors own the
remaining 43 percent of Woori Bank.
DEARTH OF FOREIGN INTEREST
The government has so far recouped 5.8 trillion won from
Woori asset sales as of May though that figure does not include
gains from two units that have been sold. Proceeds of some asset
sales are expected to go towards paying down Woori Finance's
There was limited foreign investor interest in some earlier
asset sales, but all chosen buyers have been local.
Costs have risen and competition has intensified in South
Korea's banking market, prompting Citigroup Inc, Standard
Chartered Bank and HSBC to all pull back.
Under the government's plan, Woori Finance Holdings will
first be merged with Woori Bank so the bank's value is roughly
equivalent to the 8.2 trillion won ($8 billion) market cap of
Woori Finance, a government official said, declining to be
identified as he was not authorised to talk to the media.
A 30 percent stake would be worth some $2.4 billion but a
winning bid is also expected to include a premium, taking the
potential sale amount to around $3 billion, analysts have said.
The remaining 27 percent will be sold off in a dutch auction
where bidders will bid for preferred stake sizes of between 0.5
percent and 10 percent.
Both tranches will proceed simultaneously. Bidders are free
to bid in both tranches and multiple times in the dutch auction.
The sales notice will be out in September after tapping the
market for bidder interest and bids are expected to be due by
end-November, the Financial Services Commission said.
Preferred bidders for the 30 percent stake and the smaller
stakes are set to be chosen within the year, it added.
($1 = 1017.8000 South Korean Won)
(Editing by Edwina Gibbs)