Woori Bank moves closer toward privatization

Seven financial companies became buyers of a combined 29.7 percent stake in Woori Bank that is owned by the government, an initial step towards privatizing the state-owned bank.

After a list of eight bidders was confirmed Friday, the Financial Services Commission, a top financial regulator, and the state-run Korea Deposit Insurance Corporation on Sunday picked the seven firms.

Those acquiring the Woori shares, which are worth around 2.4 trillion won ($2.1 billion), are IMM Private Equity, China’s Anbang Insurance-owned Tong Yang Life Insurance, Eugene Investment and Securities, Kiwoom Securities, Korea Investment and Securities, Hanwha Life Insurance and Mirae Asset Global Investments.

Seoul-based IMM Private Equity is acquiring the largest stake at 6 percent, while Mirae is acquiring the smallest portion at 3.7 percent. The remaining five were assigned 4 percent each. The acquisition process will be finalized by mid-December.

The sale marks the completion of the first stage of privatizing the bank, which the government took ownership of in 2001 in the aftermath of the 1998 Asian currency crisis. The government owned a controlling 51 percent stake in the bank through the Korea Deposit Insurance Corp before Sunday’s sale, down from 57 percent two years earlier after a sale of a 6 percent stake to minor shareholders during the interim period.

Korea Deposit Insurance Corp. is set to recoup another 2.4 trillion won from the stake sale, raising the sum of recovered bailout money to 10.6 trillion won, or 83.4 percent of the public funds injected into Woori.

The success of the latest auction follows four foundered attempts to sell the government’s entire shares to a single bidder. After the last effort in June 2014, the government changed its strategy, opting to split the sale of the stake into two tranches: a 30 percent controlling stake for a single buyer who is interested in actually managing the bank and the remaining 27 percent stake for multiple investors seeking profits.

The seven financial companies are set to become oligopolistic shareholders, or shareholder whose aggregate stocks or investments exceed 51 percent of total shares. Except for Eugene and Mirae Asset, which previously said the acquisition was for investment’s sake, the remaining five new shareholders will each be entitled to name one external member of the board of directors of Woori Bank and the directors will appoint the head of the bank.

Such a management style, which gives greater power to the external board of directors, is nearly unprecedented worldwide and it remains to be seen whether the experiment will be successful.

“We expect the management led by oligopolistic shareholders to become a brand-new model that pursues a ‘reasonable management system’ with a shared goal of resuscitating corporate value,” said FSC in a statement.

But a long, hard road lies ahead for the bank, given that the government still needs to sell the remaining 21.4 percent stake to one out of the seven, who will eventually become the “owner” next year at the earliest.

BY SEO JI-EUN [seo.jieun@joongang.co.kr]