KB Financial Group made its bid Monday to buy two affiliates of Woori Finance Holdings Co., as the government moves a step closer to privatizing the state-run banking group, officials said.

The second-largest South Korean banking firm submitted its bid to take over Woori F&I Co., the debt investment unit, and auto insurance arm Woori Financial Co., according to the Financial Services Commission (FSC) and bank officials familiar with the matter.

Four other financial companies, including local brokerage house Daishin Securities Co. and local unit of Kohlberg Kravis Roberts, will vie to purchase Woori F&I, they said.

KB Financial and Daishin Securities handed in their bids for both units.

The bidding came as a subsequent process after a preliminary bidding for the two units took place on Oct. 21. More than a dozen bidders were selected as adequate buyers by the FSC and Woori Finance, but many of them withdrew their bids citing the price tag.

Woori F&I has drawn a lot of interest from private equity firms as the most lucrative affiliate since the bad debt market in Korea has a high growth potential.

But most of them decided to scrap the acquisition plan as they realized that the non-performing loan (NPL) business is better off being jointly run by multiple financial firms, the FSC said.

Woori Finance plans to pick the preferred bidder for the two affiliates as early as Friday.   

The sale of Woori F&I and Woori Financial is part of Woori Finance's second batch of privatization packages.

The first batch includes its two regional bank affiliates-Kyongnam Bank and Kwangju Bank-and the third consists of its flagship unit, Woori Bank.

The FSC kicked off its plan to place Woori Finance into private hands in late June for the third time after two failed attempts under previous administrations due to a lack of buyers.

The state-funded banking giant, worth 320 trillion won (US$302.7 billion), was created in 2001 by merging five troubled banks in the wake of the Asian financial crisis in the late 1990s, with 13 trillion won of taxpayers' money put in. (YONHAP)