Four show an interest in Daewoo

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Four show an interest in Daewoo

The state-run Korea Development Bank wrapped up its preliminary bidding process on Monday to sell shares of Daewoo Securities, the nation’s second-largest brokerage firm.

Immediately after the preliminary bidding session closed at 3 p.m. on Monday, the bank revealed that four firms submitted applications.

Three of the bidders were KB Financial Group, Mirae Asset Securities, and Korea Investment Holdings, according to regulatory filings at the Financial Supervisory Service.

The labor union of Daewoo Securities also bid, in an ambitious effort to take back the company in an employee stock ownership plan.

Market insiders say it will be difficult for the union as it is unlikely to be able to raise enough cash to compete with the larger three big-name financial groups.

Chinese capitals like the Citic Group, which some in the local financial industry thought were likely join, did not apply.

The state-run bank is selling Daewoo-related companies as a package. KDB and the Financial Services Commission jointly holds a 43 percent stake of Daewoo Securities and 100 percent share of KDB Asset Management, previously owned by Daewoo Securities.

At the preliminary session on Monday, the four candidates submitted the acquisition price that each brokerage wants to pay and a specific financing plan.

Daewoo’s market value is estimated to be around 1.77 trillion won ($1.55 billion). The three brokerage firms have reportedly written down much higher prices, which many industry insiders expect to be up to 2.3 trillion won, by injecting 20 to 30 percent additional cost of the market value as a premium for management rights.

Daewoo Securities is the industry’s second largest player, sized about 4.35 trillion won in total assets as of the first half of this year, following NH Investment & Securities 4.5 trillion won.

Whoever wins the bidding will become the industry’s largest player, beating current No. 1 NH Investment & Securities, by several billions of won.

Mirae Asset and Korea Investment & Securities, an affiliate of Korea Investment Holdings, are two of the largest players on the top 10 list by asset, but they hope to become No. 1 via this acquisition. Mirae Asset issued new stocks in September to increase its capital power to obtain Daewoo.

Besides simply expanding, some bidders hope to take advantage of Daewoo Securities’ vast variety of business units.

KB Financial Group hopes to strengthen its securities unit KB Investment & Securities via this acquisition.

The KDB will select bidders who can compete for the main bidding, which is scheduled for next month,
to give bidders time and inspect the company.

The KDB aims to complete the whole procedure within the first half of next year.

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