RETAIL BANKING | Tony Chua, Korea

Woori’s privatization hits snag anew

National Pension Service’s unwillingness to participate in Woori stake purchase sale raised difficulty for three bidders to secure $6bn capital.

If the three Korean private equity funds that expressed interest in a controlling stake in Woori Financial Holdings are going to go forward with their bids, they’re going to have to do it without Korea’s largest investor.

With the National Pension Service not willing to partner with any of the prospective buyers, concerns have arisen that the private equity funds (PEFs) may face difficulty in securing capital for the $6 billion sale, raising the possibility that the government will yet again fail in its bid to sell off the state-run banking group.

“We are negative about investing in the private equity funds, since they are financial investors rather than strategic investors,” an official from the National Pension Service told reporters yesterday. The NPS is the world’s fourth-largest pension fund with 339 trillion won ($319 billion) worth of assets under its management as of April. “The NPS’ internal guidelines on alternative investments stipulate that investments be made in strategic investors.” 

Three local private equity funds - Vogo Fund, MBK Partners and TStone Corporation - submitted letters of intent late last month to buy at least 30 percent of the 56.97 percent government stake in Woori Finance. 

Negative public sentiment has dogged PEFs, as they are viewed as short-term investors rather than long-term ones. The experience of Lone Star, which is in line to make a massive amount of money from its stake purchase in Korea Exchange Bank, has left a sour taste in most Koreans’ mouths.

The government is trying to privatize Woori after rescuing it with taxpayer money in the aftermath of the 1997-98 Asian financial crisis, but no banking group had submitted a letter of intent. Instead three private equity funds stepped up with letters of intent, and each had been hoping that the NPS would dip into its abundant funds to aid their bids. 

View the full story in Joongang Daily.

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