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M&As

S.Korea leaves Asian crisis behind with Woori privatization

State-run KDIC to reduce Woori ownership to 5.8% after selling a 9.3% stake to five domestic bidders

By Nov 22, 2021 (Gmt+09:00)

S.Korea leaves Asian crisis behind with Woori privatization

Two decades after the onset of the 1997-98 Asian financial crisis, the state-run Korea Deposit Insurance Corporation (KDIC) is finally set to privatize Woori Financial Group. It is now selling a 9.3% stake in the holding company to five domestic companies, including Eugene Private Equity, the country's top financial watchdog said on Monday.

The upcoming stake sale, estimated at 980 billion won ($830 million) based on Woori's market value, will cut the KDIC's stake in the group to 5.8%. The deal will fully privatize the country's No. 4 banking group in 23 years, since it received 12.8 trillion won in taxpayers' money in the wake of the Asian financial crisis.

South Korea's Public Fund Oversight Committee has chosen five bidders -- Eugene PE, KTB Asset Management Co., an Align Partners-led consortium, Dunamu Inc. and Woori's employee share ownership association -- as the buyers of a 9.3% stake, according to the regulatory Financial Services Commission (FSC). 

Their average purchase price is around 13,000 won per share, in line with its market price of 13,400 won as of Monday's close.

Eugene PE, wholly owned by ready-mix concrete manufacturer Eugene Co., will be buying a 4% stake in Woori to become its fifth-largest shareholder. With the stake purchase, Eugene PE will be granted the right to recommend a non-executive director of Woori Financial, adding to the current five outside directors.

The PE firm made the highest bid among contenders for Woori, in which the state agency in September announced a plan to offload up to a 10% stake in a competitive tender by year's end. Currently, KDIC is the single largest shareholder with a 15.13% stake in Woori.

Apart from Eugene PE, KTB will take a 2.3% stake in Woori. Three other investors --  an Align Partners-led group, Dunamu, an operator of South Korea's top cryptocurrency exchange Upbit and Woori's employee share ownership association -- will secure a 1% stake in the group, respectively. Align Partners was set up by a former KKR &Co.'s Korean banker.

Shareholders in Woori after KDIC's stake sale:

Shareholder Shareholding
Woori's employee share ownership association 9.8%
National Pension Service 9.42%
KDIC 5.8%
IMM Private Equity 5.57%
Eugene PE 4.0%
Fubon Life Insurance 3.97%
Korea Investment & Securities 3.77%
Kiwoom Securities 3.73%
Hanwha Life Insurance 3.16%

The public tender on Nov. 18 for Woori shares drew nine bidders, including Harim Group, a leading Korean poultry products company, mid-sized builder Hoban Construction Co. and Korea Investment Holdings Co.

South Korea's then Finance Minister Lim Chang-yeol (center in the front row) signing an IMF-led rescue package in December 1997
South Korea's then Finance Minister Lim Chang-yeol (center in the front row) signing an IMF-led rescue package in December 1997


Woori was created after combining three Korean banks, among the six leading domestic lenders on the brink of collapse during the Asian financial crisis, which forced the country to receive a bailout package from the International Monetary Policy in late 1997.

The KDIC has since retained its role as the single largest shareholder in the combined entity. The state agency has reduced its ownership through block deals, after its previous attempts in the 2010s to sell the banking group as a whole had failed.

"Twenty-three years after public funds were injected (into Woori), it is successfully completing full privatization," FSC said in a statement. "Now it will be able to accelerate its shift into management focusing on shareholders and other interested parties."

This month Woori was allowed to adopt its in-house credit assessment system to calculate risk-weighted assets, which banking sources said would give it more leeway to increase investments. 

The sources expect that following the stake sale by the state agency, Woori will pursue M&As more actively to bolster non-banking businesses, in which Woori has weakness relative to domestic rivals. 

FROM CONCRETE MANUFACTURER TO FINANCIAL PLAYER 

Eugene Group, which runs Eugene Investment & Securities Co., started as a ready-mixed concrete company in 1979 and then has diversified into construction, logistics and brokerage businesses through acquisitions.

"Since Woori is a stable, large-sized financial company, we concluded that Woori was a good investment target in the period of rising interest rates," a Eugene PE source told The Korea Economic Daily. "As a financial investor, we will do our best to help the company grow."

Among other new shareholders in Woori, Dunamu is likely to solidify its position as the country's top cryptocurrency exchange after becoming its shareholder. In September of this year, Dunamu raised about 100 billion won in new funding, which valued the startup at over $10 billion.  

Woori Financial closed up 2.29% at 13,400 won on Monday, versus a 1.4% gain in the wider Kospi market.

(Updated with a statement from the Financial Services Commission)

Write to Soram Jung and Dae-kyu Ahn at ram@hankyung.com

Yeonhee Kim edited this article.

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