18 bidders vie for a piece of Woori Bank

The equity sale of Woori Bank shares attracted a pack of bidders on Friday, a positive sign after the government’s four previous attempts to attract private investors failed. The auction could fetch up to 3 trillion won ($2.7 billon).

The Financial Services Commission, the regulator leading the sale of Woori, said that 18 financial companies submitted letters of intent to acquire stakes of 4 percent to 8 percent for the 30-percent stake held by state-run Korea Deposit Insurance Corporation.

The FSC is bound to weed out at least 10 bidders in the final announcement set for mid-November.

The public deposit insurance body holds a total of 51.06 percent share in the bank, though the FSC decided to first offload the 30 percent stake to a group of interested parties and later sell the remaining shares.

The regulator confirmed only the number of suitors and declined to reveal the name and amount of shares that the bidders hope to gain.

Still, three local bidders - Korea Investment & Securities, Kiwoom Securities and Hanwha Life Insurance - made their plans public. Other bidders reportedly include Tongyang Life Insurance and a slew of private equity houses such as IMM Private Equity, Vogo Fund, H&Q Asia Pacific, CVC Capital Partners, Japan’s Orix PE, PAG, Baring Private Equity Asia and Affinity Equity Partners. Tongyang is owned by China’s Anbang Insurance.

Korea Investment & Securities said in an electronic disclosure Friday that it submitted a letter of intent to buy a slice of Woori Bank shares, while declining to reveal how much it wants.

“To expand business and diversify investment opportunities, Korea Investment & Securities decided to participate in the bidding,” the securities company said.

A source at the securities companies cited high dividend ratio and underestimated share prices.

“Woori Bank boasts high dividend and low price book value ratio which will later translate into a boost in the value of share prices,” the source said. “The potential privatization can also lead into the increase in profitability.”

Analysts agreed prospects for Woori appear optimistic after privatization.

“If the privatization becomes successful the government will no longer intervene in the bank’s management,” said Han Jung-tae, an analyst at Hana Financial Investment. “The bank is performing very well in terms of rate of returns and asset quality, a core factor that drew in more bidders participating in the stake acquisition.”

Kiwoom Securities said it is interested in a 4 percent share. Hanwha Life Insurance decided Thursday, confirming it is taking part in the bidding.

The insurer is said to be interested in so-called bancassurance, a strategy in which an insurance company uses a bank’s sales channel to sell insurance products.

“Hanwha will benefit from the purchase in a long-term perspective in expanding branches in foreign countries,” said Han Seung-hee, an analyst at NH Investment & Securities. “Woori has merged with Indonesia’s top 30 bank called Bank Saudara and it currently holds 74 percent of the share. It will help Hanwha to expand into Vietnam and Indonesia.”

But some have stepped back from engaging in the race. Kyobo Life Insurance said Thursday it would not participate and said it was risky to invest large amounts in one company.

The government’s focus was on retrieving the massive amount of bailout money that went into Woori Financial Group. During the Asian financial crisis of the late 1990s, the government invested 12.8 trillion won ($11.4 billion) in Woori Financial Holdings, although it has recouped 64.9 percent of it, or about 8.2 trillion won, through sales of subsidiaries and minor stakes.

BY PARK EUN-JEE, KIM YOUNG-NAM [park.eunjee@joongang.co.kr]