BS With JB Named Preferred Bidders for Woori Regional Banks

Dec 30, 2013 10:34 pm ET

(Updates with fund manager comment in fourth paragraph.)

Dec. 31 (Bloomberg) -- South Korea named BS Financial Group Inc. and JB Financial Group Co. preferred bidders for two regional banks as the government sells units of Woori Finance Holdings Co., the country’s largest financial group by assets.

BS Financial was picked for a 57 percent stake in Kyongnam Bank, while JB Financial was chosen for a holding of the same size in Kwangju Bank, the Financial Services Commission said in an e-mailed statement today. State-run Korea Deposit Insurance Corp. is selling the stakes, for which financial terms weren’t disclosed. The banks aren’t publicly traded and the stakes are valued at about $1.3 billion on Woori’s books.

The selection comes a week after Woori Finance, a state- owned holding company created in 2001 through the bailout and merger of the nation’s weakest banks, chose NH Financial Group Inc. as the preferred bidder for its brokerage unit. After three failed attempts since 2010 to sell the entire group, the government is now disposing of its assets individually.

“Adding Kyongnam and Kwangju will benefit BS and JB by giving them the scale they need and expanding their client bases,” Heo Pil Seok, chief executive officer at Midas International Asset Management Ltd., which oversees about $8 billion, said by phone before the preferred bidders were named. “The government’s privatization of Woori looks to be going smoothly so far.”

Strike Threat

Kyongnam Bank’s union will go on strike to protest the selection of BS Financial and take all possible measures to block the sale, the Korea Financial Industry Union, a nationwide association, said in an e-mailed statement today. The local group had supported a consortium led by businessmen based in the lender’s home province of Gyeongnam.

Unions have protested at other lenders, including a two- month strike at Standard Chartered Plc’s local subsidiary in 2011. About 2,700 of the unit’s staff staged the longest walkout in South Korean banking history to protest potential job cuts.

Shares of Woori Finance rose 3.9 percent to 13,300 won yesterday on the Korea Exchange, which is closed today. The stock gained 13 percent this year, while the benchmark Kospi index rose 0.7 percent.

BS Financial, owner of Busan Bank in Korea’s second-largest city, fell 0.6 percent to 16,000 won and JB Financial, parent of Jeonbuk Bank, a regional lender in North Jeolla province in the country’s southwest, lost 0.3 percent to 6,360 won.

The stake in Kyongnam is valued on Woori Finance’s books at 823 billion won ($780 million) as of September, while the holding in Kwangju is valued at 556 billion won, based on calculations derived from a regulatory filing by the parent.

July Target

The government plans to sign initial agreements next month and complete the sales by July, according to today’s statement. Industrial Bank of Korea was named as second preferred bidder for Kyongnam Bank, according to the statement.

Woori Finance on Dec. 24 named NH Financial as the preferred bidder for brokerage Woori Investment & Securities Co., Woori FG Savings Bank and Woori Aviva Life Insurance Co. Kiwoom Securities Co. was chosen as top bidder to buy an unlisted asset-management unit, Woori said.

KB Financial Group Inc., beaten by NH Financial in the auction of the brokerage, was chosen as preferred bidder for leasing unit Woori Financial Co. Daishin Securities Co. will hold exclusive talks with Woori Finance for the distressed-asset trading subsidiary, Woori F&I Co., the parent company said on Dec. 6.

The government plans to start selling Woori Bank, the main lending unit, and the rest of the subsidiaries in 2014.

--Editors: Nathaniel Espino, Ben Scent