August 17, 2011 / 7:49 AM / 6 years ago

South Korea's Woori sale set to founder again

SEOUL (Reuters) - All but one bidder for South Korea’s biggest bank privatization have pulled out, likely killing an ill-fated deal that analysts said was never going to succeed because of political opposition.

The financial regulator in charge of the landmark bank privatization said on Wednesday that a final decision would be made on Friday after local private equity firm MBK Partners submitted the only bid for Woori Financial Holdings 05300.KS.

Jun Sung-in, a professor at Hongik University in Seoul, said that it would be “no surprise” if the potential $5.1 billion deal failed.

“In the first place, the government had no willingness at all to sell the country’s biggest banking group as there are just too many interest groups involved.”

This was the second attempt to find a private owner for the country’s biggest banking group by assets, with last year’s attempt also failing to draw sufficient interest.

Preliminary bids for the government’s 57 percent stake were due Wednesday, but the sale process was hit by recent steep declines in world markets and public criticism of the role of private equity funds.

Officials had wanted more than two bidders to make preliminary offers to show South Korean voters that the government had sought to get value for money.

In May, South Korea resumed the Woori sale process days after it postponed a decision on whether U.S. buyout fund Lone Star LS.UL was fit to be Korea Exchange Bank’s 004940.KS top shareholder.

A woman uses her mobile phone at a branch of Woori Bank in Seoul August 17, 2011. REUTERS/Lee Jae-Won

Lone Star has been trying to sell Korea Exchange Bank for years, but has been dogged by lawsuits and by public hostility toward foreign private equity funds that bought Korean assets cheaply in the wake of the 1998 financial crisis.


    One local private equity fund, TStone, which partnered with buyout firm J.C. Flowers, blamed the recent selloff in Korean equity markets for the pullout as well as the sale process.

    “TStone has decided not to submit a preliminary bid proposal due to controversy over the sale of Woori, as their shares plummeted recently as a result of the turmoil in the global financial markets,” the fund said in a statement.

    Another South Korean bidder, Vogo Fund, said it believed the chances of a sale were “low,” as it had failed to find a proper strategic partner.

    That left a consortium led by MBK as the sole bidder. It partnered with Goldman Sachs (GS.N), Canada’s Pension Plan Investment Board and other local lenders.

    Woori shares recently tumbled to almost a two-year low as world stock markets swooned, but on Wednesday the shares rose 1.3 percent to 12,100 won ($11.30)outperforming a 0.68 percent rally on the wider KOSPI index.

    ($1 = 1070.050 Korean won)

    Reporting by Ju-min Park; Editing by David Chance and Matt Driskill

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