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Sale of Woori’s regional units to face bumpy road

The government will accept “preliminary” bids from potential investors for Kwangju Bank and Kyongnam Bank after it puts up a notice on the sale of the two provincial units of Woori Financial Group next Monday.

Among the preliminary bidders, state agencies will single out several competitive investors ― the so-called “short list” ― for the taxpayers’ money-injected Woori Financial.

The state-led project, however, is likely to face several stumbling blocks. There is a high possibility that the “logic behind politics” could emerge as a critical hurdle for the auction timetable.

One difficulty is that regional political leaders seemingly oppose a scenario that would have South Jeolla Province-based Kwangju Bank and South Gyeongsang Province-based Kyongnam Bank acquired by other provincial banks.

They argue that the two lenders should not be handed over to investors like Busan-based BS Financial, Daegu-based DGB Financial and North Jeolla Province-based JB Financial groups.

They are calling for policymakers to sell the two banks to originally regional capital in South Jeolla and South Gyeongsang provinces “as a swingback” to their positions as financial firms for the regional citizens before the 1997 Asian financial crisis.

Meanwhile, investors on the coming short list will be entitled to conduct preliminary due diligence on the two Woori units.

The government, then, will accept “final” bids from the candidates and plans to select the preferred bidder by the end of the year.

The preferred bidder will then conduct another round of due diligence and carry out price negotiations with financial regulatory officials.

The Financial Services Commission and the state-run Korea Deposit Insurance Corp. have the goal of closing the two takeover deals by May 2014.

Late last month, the FSC publicized an updated project to privatize Woori Financial Group, which features three separate auctions by dividing the group’s 14 units into three packages.

By Kim Yon-se (kys@heraldcorp.com)
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