Korea state agency to sell up to 10% Woori Financial stake in block deal

The Korea Deposit Insurance Corp. (KDIC) has resumed the ongoing sale process of its 17.25% stake in Woori Financial Group in four years. It will offer up to 10% in the holding company, worth 611 billion won ($514 million).

For the stake sale, the state agency selected JPMorgan, Samsung Securities Co. Ltd. and Mirae Asset Daewoo Co. Ltd. as underwriters and sent teaser letters to potential buyers at home and abroad last month, according to investment banking sources on Sept. 7.

“We are looking for investors interested in buying the shares in a block deal,” said one of the sources. “Bidders will write down the size of the stake they want to buy within 10%, and suggest the price.”

But KDIC, the single largest shareholder in Woori, has not yet determined a specific timeline. It is expected to invite bids within the next few months, depending on the share price.

The resumption of the stake sale process comes despite a 40% drop in the price of Woori Financial shares since June 2019, around when KDIC unveiled a plan to split the remaining stake sale into two to three tranches by 2022. In each tranche, it will offer up to 10%.

Shares in Woori Financial, with a market capitalization of 6.1 trillion won, closed unchanged at 8,460 won on Monday, or 0.27 times its book. That is below the 12,000 won level seen as the appropriate price for the state agency to retrieve the public money it pumped into Woori.

But the low share price could provide a good opportunity for potential buyers, after Affinity Equity Partners and Baring Private Equity Asia agreed last week to invest a combined 1.2 trillion won in new shares of Shinhan Financial Group, at a valuation of around 0.35 times its book.

After several failed attempts to sell the banking group as a whole in the 2010s, KDIC has reduced its stake in Woori through block sales.

In its most recent block sale of Woori, it offloaded a 29.7% stake to a group of seven non-banking Korean financial services firms, including IMM Private Equity, in December 2016.

Late last year, KDIC tried in vain to sell its remaining stake to foreign investors.

KDIC injected 12.8 trillion won into Woori Financial Group, a merged entity of five troubled Korean financial services companies, in the wake of the 1997-98 Asian financial crisis. It has retrieved 11.1 trillion won of the injected public money so far.

Because the rule of separation of financial and industrial capital, private equity firms, categorized as industrial capital in Korea, are not allowed to buy more than a 4% stake in a Korean bank or banking group.

Write to Sang-eun Lucia Lee at selee@hankyung.com