Goldman Sachs Likely to Join Woori Bid

Goldman Sachs is likely to invest about 600 billion won ($555 million) in South Korean private equity fund MBK Partners in its bid for Woori Finance Holdings, Reuters reported this week. The second round of bidding for Woori will close on August 17. Competing local firms TStone and Vogo Fund are also in the running.

(Reuters) – U.S. investment bank Goldman Sachs (GS.N) is very likely to invest around 600 billion won ($555 million) in South Korean private equity fund MBK Partners in its bid for Woori Finance Holdings (053000.KS), a source with direct knowledge of the proposed deal told Reuters.

The second round of bidding will close on Aug. 17 and three local private equity firms – MBK Partners, TStone and Vogo Fund – are in the running for the government’s up to $6 billion stake sale, the biggest bank privatisation in South Korea.

“I can say there is an 80 or 90 percent chance that Goldman will join with MBK,” said the source who could not be named due to the sensitivity of the proposed deal.

Goldman declined to comment when asked about the deal.

MBK Partners has already teamed up with local lender Korean Federation of Community Credit Cooperatives and is close to finalizing the deal with Goldman and another South Korean regional bank Busan Bank, the source said.

The Wall Street bank’s potential investment comes as some media reports and others have criticized the involvement of private equity firms in the privatization process.

Private equity firm Lone Star has been hit with a series of criminal proceedings over its purchase of a stake in Korea Exchange Bank (004940.KS), which it wants to sell to Hana Financial Group (086790.KS).

Goldman itself used to be the top shareholder in Hana, but sold down part of its stake.

Hong Joon-pyo, the leader of a South Korean ruling Grand National Party parliamentary faction said recently that the government’s 57 percent stakes should be sold to low-income earners at a discount.

There are parliamentary and presidential elections in South Korea in 2012 and the ruling party has been hit by a string of electoral defeats.

Banking and finance buyout firm J.C. Flowers may invest in a consortium led by another contender TStone led by Min Euoo-sung, a former chief financial officer at Woori, another source told Reuters earlier.

The source said a MBK Partners-led consortium would offer to buy a 30 percent stake in Woori in the preliminary bidding, a minimum requirement for the bidding process.

Woori shares closed down 0.9 percent versus a 0.6 percent rise in the wider market .KS11. ($1 = 1080.150 Korean Won) (By Ju-min Park; Additional reporting by Stephen Aldred in HONG KONG; Editing by David Chance)