NH Financial gets nod to buy 3 Woori units

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NH Financial gets nod to buy 3 Woori units

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NH Financial Group had their wish come true on Christmas Eve when they were named preferred bidder for Woori Investment and Securities.

The financial group was also named the preferred bidder for Woori’s insurance unit and savings bank, while Kiwoom Securities was selected the preferred bidder for Woori Asset Management.

NH will go through a two-week study of the brokerage and other financial affiliates of Woori before inking a final contract next month.

If the acquisition goes through, the takeover is expected to change the landscape of Korea’s brokerage industry.

NH’s brokerage currently ranks 12th in the local brokerage market, with 878.1 billion won ($828.1 million) in capital and 6.4 trillion won in assets. Although Woori Investment and Securities is second to Daewoo Securities with 3.5 trillion won in capital as of September, by assets it tops the industry with 29.2 trillion won.

With the acquisition, NH will climb to the top quickly with combined capital of over 4 trillion won and 35 trillion won in assets.

Woori currently has 107 branches across the country while NH’s brokerage firm has 31. When combined, its 138 branches will be the largest number in the country.

NH has been in dire need of acquiring a competitive financial company since it was spun off from the agricultural cooperative Nonghyup in March 2012.

Although the spin-off got a lot of attention, NH Financial Group has failed to make a huge mark on the industry. In the third quarter, its net profit shrank 23.2 percent year-on-year to 114.9 billion won. Its net profit for the first nine months was 218.6 billion won, 40 percent less than a year earlier’s 364.3 billion won.

Diversifying NH Financial Group’s portfolio has been considered one of the most important strategies.

NH Financial Group currently relies heavily on its banking business, which accounts for 80 percent of its total revenue. Taking over Woori’s brokerage house would lower this reliance to 70 percent and raise the earnings of its brokerage businesses from 2 percent of revenue to over 12 percent.

Woori Investment and Securities is also expected to raise NH’s competitiveness in dealing with corporate clients and investment banking.

In a recent interview, Chairman Yim Jong-yong said NH Financial Group could only secure competitiveness when all three of its businesses - banking, securities and insurance - are well positioned.

Clear plans on how the merged brokerage firms will operate have not been announced yet.

But analysts expect the two brokerage companies to be operated separately for the first year or two.

The decision to give NH the opportunity to take over one of the country’s leading brokerage houses didn’t come easily.

On Tuesday, it took Woori’s board of directors six hours to make its final decision since some directors didn’t agree on the sale.

Some directors reportedly considered the offer price to be extremely low. The government and Woori was said to expect roughly 1.5 trillion won from the sale. In fact, the choosing of the preferred bidder was postponed Friday after the board couldn’t make a final decision.

After the announcement was made, Woori Financial Group said NH received the highest points not only on acquisition price but also on its ability to secure the funding needed for the takeover, as well as its future management plan.

NH’s wasn’t the highest offer.

NH was said to have proposed 1 trillion won for the brokerage firm. In addition to the brokerage firm, it has offered 60 billion won for the life insurance unit, 40 billion won for the savings bank and 50 billion won for the asset management unit.

Competitor KB Financial Group was said to have offered 1.1 trillion won for the brokerage. However, an offer was made for the brokerage unit alone, which went against the government’s promise to sell the units as a block.

Financial Service Commission Chairman Shin Je-yoon on Monday reiterated the government’s stance on the block sale.

“The government thinks the block sale is the answer,” Shin said. “However, it is a decision that [Woori’s] board of directors should make.”

Pine Street Group, which was another bidder, submitted a similar offer but wasn’t named the preferred bidder because it reportedly failed to provide evidence of how it would finance the acquisition.

Meanwhile, Kiwoom Securities was selected the preferred bidder for Woori’s asset management affiliate after reportedly offering 80 billion won.

Kiwoom created its own asset management company in September 2010.

As of last year, Kiwoom Asset Management reported 14 trillion won in total assets and a net loss of 500 million won. Woori Asset Management last year reported 80 billion won in total assets and a net profit of 855 million won.


By LEE HO-JEONG [ojlee82@joongang.co.kr]

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