South Korea May Suspend $6B Auction for Woori Finance

With two potential bidders pulling out this week, South Korea may put the breaks on the sale of the government’s 57% stake in Woori Finance Holdings, Reuters reported. The government will decide soon whether to suspend the $6 billion sale, Reuters said. Two groups, formed by Woori employees and customers, decided this week to pull out of the sale. South Korea received 11 bids in the first round of the auction, though most bidders wanted only minority stakes in Woori. Among the 11 bidders were the Carlyle Group, Macquarie Group, MetLife, and local private funds Vogo and MBK Partners, Reuters reported.

(Reuters) – South Korea plans to decide soon whether it will suspend a sale of the government’s 57 percent stake in Woori Finance Holdings (053000.KS) after two strong candidates pulled out of the $6 billion auction, a source said on Wednesday.

Two bidders, formed by Woori employees and customers, said this week they would not participate in the sale, demanding the government loosen sales criteria and dealing a fresh blow to the protracted sale, which had aimed to mark the end of Korea’s bank privatisation efforts.

“Market conditions have turned very unfavourable, with the recent loss of potential candidates,” said the source who had direct knowledge of the issue but could not be named because he was not authorised to speak on the record.

“Further delays in the bidding process will cause a lot of uncertainty in the market… The government wants to decide as soon as possible whether it’s desirable to go ahead with the auction.”

The Woori sale, which would be the biggest ever financial sector M&A in Korea if it is completed, has been in doubt since another strong candidate Hana Financial Group (086790.KS) opted to drop the Woori deal last month and decided to buy Korea Exchange Bank (004940.KS) instead for $4.1 billion.

The source said the government hasn’t discussed demanding bidders hefty premium to Woori’s stock price, as the deal is still in a preliminary non-binding stage, but the loss of the two candidates had dealt a blow to the auction plan

Financial Services Commission chief Chin Dong-soo also said on Wednesday maximising the investment returns of its public fund spending remains the most important criteria in Woori sale, suggesting the government may suspend Woori sale until a strong buyer emerges.

South Korea received 11 bids in the first round of auction but most of them want to take minority stakes and only the Woori employee and customer groups have sought to buy the government’s entire 57 percent.

Among the 11 bidders are Carlyle Group [CYL.UL], Macquarie Group (MQG.AX), MetLife Inc (MET.N) and local private funds Vogo and MBK Partners, according to sources.

If the sales are to go ahead, and they will miss the first target date of selecting short-listed bidders by the end of December, it will require buyers to take enough shares to replace the government as the top shareholder, the source said.

“It’s an M&A auction, not a block sale, and to meet the requirement of privatisation the government should give up its biggest shareholder title,” he said, indicating a successful buyer should take at least 28.5 percent of Woori.

(Reporting by Miyoung Kim; Editing by David Chance)