Choice of bank bidders stirs regional passions
The announcement came almost a week after NH Financial Group was named the preferred bidder for Woori Investment and Securities in a separate deal the government arranged as part of the privatization process.
Yesterday, the Public Fund Oversight Committee, which is in charge of managing the sales of Woori Financial Group, selected BS Financial Group as the preferred bidder for Kyongnam Bank and JB Financial Group for Kwangju Bank.
The state-run Industrial Bank of Korea, which took part in the bidding for Kyongnam Bank, was named as the second preferred bidder, meaning that if the deal with BS Financial Group does not go through then IBK will be given prior negotiating rights.
Along with IBK, a group of businessmen based in South Gyeongsang and Ulsan also took part in the bid.
Other bidders for Kwangju Bank were Shinhan Financial Group and BS Financial Group. No second preferred bidder was selected because “the bidding price submitted by other final bidders besides JB Financial Group fell short of [the government’s] expected price,” according to the committee, which is under the Financial Services Commission.
When the country’s financial regulator in June announced detailed plans to sell the government’s 57 percent ownership in Woori Financial Group, Chairman Shin Je-yoon emphasized that “the principle of [selecting the bidder with the] highest price will be very important” in the bidding for regional banks.
But this was opposed by regional business lobbying groups and some local resident groups, which argued that bidders based in each of the two regions should be given primary negotiating rights.
The government said it would stick to the principles of free-market competition.
In bidding for Kwangju Bank, Shinhan Financial Group and BS Financial Group are known to have offered around 300 billion won ($286.5 million) while JB Financial Group, the final winner, bid 450 billion won.
For Kyongnam Bank, BS Financial Group bid around 1.2 trillion won, which is known to be higher than what the group of regional businessmen and IBK submitted.
“There have been several hardships in the process of privatizing Woori Financial over the past six months,” FSC Chairman Shin said yesterday. “A lesson [that I’ve learned] is that it’s important to stick to the principles.”
His remarks came as politicians, businessmen and residents in South Gyeongsang put pressure on the financial regulator. They threatened that if BS Financial Group, which is based in Busan, was selected as the preferred bidder for Kyongnam Bank, they will take their money out of the bank and stop using it. The Kyongnam Bank union supported that view.
“The earnest request made by 3.3 million residents of South Gyeongsang to the government that Kyongnam Bank should be returned back to the region has been overridden by the power of money worth 1.2 trillion won,” the Korean Financial Industry Union said in a statement yesterday. “We will not only hold a protest together with the union of Kyongnam Bank but also withdraw deposits held by regional chambers and residents and make sure the acquisition by BS Financial Group of Kyongnam Bank falls through.”
Kim Moon-ho, head of the Korean Financial Industry Union, said, “There have been previous cases where deals fell through even after preferred bidders were selected. It’s not the end [of the merger] just because the Public Fund Oversight Committee selected the preferred bidder.”
The government said it would complete the privatization of the regional banks according to its plan.
“The selected preferred bidders will sign an MOU [with the government] in January,” said an FSC official. “We plan to complete both sales in July.”
By lee eun-joo [firstname.lastname@example.org]