KDB in \2T deal to sell Daewoo

Korea Development Bank (KDB) will issue a public notice of sale for Daewoo Securities on Oct 8, the bank said on Monday.

The sale, long awaited by local financial players, is likely to be the biggest deal for the second half of the year fetching well over 2 trillion won.

KDB will sell its entire 43 percent stake in Daewoo. It will be sold as a package with KDB Asset Management, which is 100 percent owned by KDB.

“We decided that selling them as a package will draw more attractive offers rather than selling them separately,” a KDB official said.

KDB Capital, which had been speculated to be sold as part of the package, will be offered separately in November, he said.

Daewoo is the country’s No.2 brokerage after NH Investment & Securities with total assets of 4.3 trillion won. It currently runs more than 100 brokerage branches across the nation and also has well-established investment banking operations.

KB Financial Group and Mirae Asset Group are set to compete for Daewoo, as the brokerage business grows as a key feature within financial firms.

KB Financial Group is said to have already sent a request for proposal (RFP) to major securities and accounting firms to set up advisory groups for the deal.

The group is determined to strengthen its brokerage businesses as the environment for commercial banking grows increasingly challenging amid low interest rates. Major financial reforms are also currently under way, forcing banks to diversify business portfolios.

Last year, KB Financial submitted a bid and failed to purchase Woori Investment & Securities, losing out to NH Nonghyup.

Mirae Asset Group, another party with a strong interest in Daewoo, is also prepping for the deal.

Mirae Asset Securities, the brokerage arm of the group, said earlier last month that it planned to raise 1.2 trillion won from rights issue, as the group seeks to generate enough cash to finance the buyout.

Success of the Daewoo buyout will make both KB Investment & Securities (the brokerage arm of KB Financial Group) and Mirae Asset Securities the biggest brokerages in the nation.

As of Monday’s closing price, 43 percent of Daewoo is worth around 1.7 trillion won. Assuming a 20 to 30 percent management premium is added, the brokerage alone will be worth around 2 trillion won.

Given that it is to be sold as a package with KDB Asset Management, the deal will likely fetch well over 2 trillion won and possibly close to 3 trillion, according to industry sources.

“The sale price will range between 2 to 2.5 trillion won. Since potential buyers have shown strong interest, the terms of sale, such as the package deal, will not likely come as a discouraging factor,” said Kang Seung-gun, an analyst at Daishin Securities.

BY PARK JUNG-YOUN [park.jungyoun@joongang.co.kr]