Prospects look bright for the South Korean financial authority’s fifth attempt to privatize state-owned Woori Bank, with a handful of institutional investors positively considering applying for the bid slated to open Friday.

So far, Kyobo Life Insurance, Hanwha Life Insurance and Korea Investment Holdings have confirmed as of Tuesday that they are considering buying splinter stakes to become one of the oligopolistic stakeholders of the bank. 


In August, the Financial Services Commission’s Public Fund Management Committee announced its fifth plan to sell about 30 percent out of a 48.09 percent stake in the bank held by the Korea Deposit Insurance Corp. to multiple investors, splitting the shares into 4 to 8 percent chunks. The committee expected a minimum of four investors bidding for the 8 percent stake.

The financial authority assessed that it would be hard to find a single adequate buyer to take over the 30 percent stake and management rights of the bank, considering pessimistic market conditions. From 2010 through 2014, the authority made four attempts to do so but all of these failed.

This time, the market atmosphere has changed slightly.

Market observers say the fifth attempt that involves dividing the stake into chunks with the right to recommend outside directors for the bank’s boardroom is quite appealing, not only to strategic investors but also financial investors.

The 4 to 8 percent stake splinters are estimated to cost potential investors 300 billion won ($268 million) to 600 billion won at the maximum, which is considered “fairly affordable” according to some local analysts.

The aforementioned bidders that are likely planning to submit applications Friday are also considering their participation in a positive manner, without burdens regarding the management of the bank.

“Investing in a 4 to 8 percent stake without managerial rights is being considered purely from the investment point of view,” said Lee Woong-jae, a PR officer at Kyobo Life. “We are focusing on whether the market value of the bank will appreciate further or not.”

Kyobo was mentioned as a potential owner of the bank until 2014.

The insurer is likely to hold an emergency board meeting before submitting its letter of intent this week to finally decide on its application.

Hanwha Life Insurance is also going to convene a board meeting Thursday to discuss the issue. The insurer is paying quite some attention to the deal, since it is a major stakeholder of K-Bank, the country’s first web-based bank that will be launched in the next few months.

“Having the Woori Bank stake would help the insurer secure wider infrastructure for banking both online and offline,” said a spokesman on behalf of the company. “The purchase would also help create synergy between Hanwha and Woori Bank on the bancassurance business.”

Korea Investment Holdings, which failed to acquire Daewoo Securities and Hyundai Securities earlier this year, is also going for the bid with less burden this time. The company is also the largest stakeholder of Kakao Bank, another internet-only bank to be launched within the year.

“Unlike the previous biddings, there is no fierce competition, and all we have to do is just buy the stocks,” said Park Jin-ho, a PR officer at the company. “Since the deal doesn’t cost a lot, it is not going to be a burdensome decision.”

Besides the three, the National Pension Service, the world’s fourth-largest sovereign pension fund operator, KT, the nation’s No. 2 mobile carrier that is also leading the K-Bank consortium, and some foreign private equity funds are also showing keen interest in the sale.

Posco was said to be interested in taking part in the bidding, but the steelmaker officially withdrew the plan due to its internal restructuring process going forward.

There were high speculations that foreign financial institutions might take over the Korean bank, but that possibility has become lower than before as strong local buyers have taken the lead in the bidding.

However, Affinity Equity Partners, Baring Private Equity Asia and Orix Private Equity, which Woori Bank CEO Lee Gwang-koo contacted in person at recent investor relations meetings, are being considered as possible bidders.

“The mood is very different from the previous biddings, and expectations about a successful deal are rising within the banks,” said Jang Choong-sik, head of the PR team at Woori Bank. “Most global banks are run under similar oligopolistic shareholding systems, which would add to the bank’s global competitiveness, if good stakeholders fill up the bank.”

Analysts are releasing better assessments on Woori Bank’s market value, too.

“As the bank’s earnings are improving significantly this year, the dividend yields of the bank stock are the highest among local banks,” said Han Jeong-tae, an analyst at Hana Financial Investment.

Han estimated the bank’s average dividend yields to be 5.4 percent for the past two years, and the rate could rise even further if the privatization goes smoothly. The bank is also projected to obtain an about 15 percent increase in its annual net profit to reach 1.2 trillion won by the end of the year, he said.

Woori Bank’s shares closed at 11,200 won on Tuesday, unchanged from the previous day. The bank’s value plummeted to around 8,100 won in January as the market outlook for the privatization had been dire. 

By Song Su-hyun(song@heraldcorp.com)