WF - Woori Finance Holdings

[jch548]

I purchased a position in WF this week. Woori is one of the largest banks in Korea. The government is accepting bids to sell their controlling stake. The sale of the government's stake has depressed the share price as investors anticipate all these shares freed to trade. Given how cheap the shares are I don't think this is an issue as it looks like long term investors are looking to pick up the Korean government's stake.

 

After Q211 BV is $81.50 per ADR. WF earned $502mm and $791mm in Q1 and Q211 respectively. The stock closed at $31.70 on friday.  For the first six months eps is $5.33 per ADR. Q1 earnings were impacted by significant loan losses.

 

Woori has shareholders' equity of nearly $20 billion in U.S. dollars. They have diversified operations including brokerages, credit cards and insurance.

 

If the world economy could somehow get through it's current problems long-term these shares could appreciate 100 to 200%.

 

 

 

SEOUL | Thu Aug 11, 2011 8:09am EDT

 

SEOUL (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 August 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 privatization 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 markets/index?symbol=kr%21kspi">.KS11.

 

($1 = 1080.150 Korean Won)

 

 

[beerbaron]

The Goldman Sachs Group, Inc. Likely To Join Bidding Consortium For Woori Finance Holdings Co., Ltd.-Reuters

 

 

Thursday, 11 Aug 2011 05:11am EDT

Reuters reported that The Goldman Sachs Group, Inc. is very likely to invest around 600 billion won ($555.5 million) in South Korean private equity fund MBK Partners so as to participate in its bid for Woori Finance Holdings Co., Ltd.

[jch548]

Korean banks did well last night. KB Financial was up 10% on no specific news I could see.

 

It will be interesting to see where the bids come in. I don't think the government want's to sell cheap so 90% of BV? The listed shares could see a nice pop as they are trading under 50% of BV.

[jch548]

Bid trouble as only MBK submitted a bid for Woori. this group includes Goldman.

 

 

Woori sale falls through on lack of bidders SEOUL, Aug. 17 (Yonhap) -- The sale of state-run Woori Finance Holdings Co. virtually fell through again on Wednesday as only one investor submitted a preliminary bid for a minimum 30 percent stake in the country's top banking group by assets.

 

  MBK Partners Ltd., a homegrown private equity fund, bid to buy Woori Finance, according to an e-mailed statement by Korea Deposit Insurance Corp. Two other private equity funds, TStone Corp. and Vogo Investment, which had also submitted letters of intent, did not take part in the preliminary bidding that closed at 5 p.m.

 

  The government had said the Woori sale would be valid only if two or more prospective buyers submitted bids.

 

  Market watchers, meanwhile, said that the government may be reluctant to proceed with the sale since the recent sharp fall in Woori share prices do not abide by the government's goal of maximizing public fund redemption.

 

  Shares of the top banking group dropped around 27 percent over eight straight sessions between Aug. 2-11, reflecting investor concerns on the first-ever U.S. credit rating cut and the eurozone's debt crisis.

 

  South Korea has been seeking to sell its 56.97 percent stake in Woori Finance, which the government rescued with taxpayer money in the aftermath of the 1997-98 Asian financial crisis. Efforts to privatize the top banking group, however, have fallen through due to lukewarm interest from investors.

 

  Woori Finance is one of the many financial institutions the government salvaged by injecting massive amounts of public funds when the financial crisis erupted in 1997.

 

  As of late June, the country had retrieved 101.5 trillion won (US$9.5 billion), or 60.2 percent, out of a total of the 168.6 trillion won worth of public funds used as bailout money.

 

[jch548]

I pasted below a WSJ article regarding some of the headwinds before the Woori privatization. It looks like it will be awhile before they open bidding again. Still the shares had reached a high of $80 before the financial crisis so though a bid would be helpfull in moving the shares the a sale wouldn't be neccesary to move the stock.

 

 

 

 

 

Government efforts to privatize South Korea's biggest financial company ran afoul of some terrible timing. They also fell victim to suspicions that foreign investment in Korea is either too difficult or downright unwelcome. Who shows up for the bidding next time around will say much about how much political leaders have done to ease those concerns.

 

On Friday, Seoul shelved its plans to sell off at least 30% of Woori Finance Holdings Co. after only one bidder came to the table. Woori shares ended the day down 7.8%.

 

Clearly, the turmoil in financial markets didn't help drum up bidders in what would have been one of Asia's biggest deals this year, with a potential price tag of $2.5 billion or more. Jitters about the impact of the euro-zone debt crisis on Korean banks, which get nearly a quarter of their funding from foreign lenders, aren't conducive to such risk-taking.

 

Woori, a hodgepodge of banks the government bailed out after the Asian financial crisis, has other issues, including a rise in nonperforming loans. But it has shored up its capital in recent years and has a huge deposit base in a major economy with growth prospects that outshine most developed economies. Bankers say restructuring could easily create more value from the business.

 

Domestic peers were never likely suitors in this auction. The few domestic banks able to bid for Woori are too busy getting their own affairs in order. But foreign investors had two good reasons to keep their powder dry.

 

One was the continuing uncertainty over Hana Financial Group's proposed $4.17 billion purchase of a 51% stake in Korea Exchange Bank from Texas-based private-equity firm Lone Star Funds. South Korea's regulator has delayed approving the deal, originally struck late last year, until a related legal case is resolved. In March, the country's courts reopened the question of whether Lone Star and an executive manipulated markets in 2003 to facilitate the takeover of KEB.

 

Lack of closure in the long-running Lone Star saga—this is the fund's third attempt to exit South Korea—is a deterrent for both foreign private-equity funds and any foreign banks assessing the political risk of a Woori deal running into a Hana-KEB-style delay.

 

The second reason is an ongoing battle between Standard Chartered PLC's local subsidiary and its labor union, which is challenging the banks's efforts to reward employees based on their performance, not their seniority. Anyone buying into Woori could face similar headaches in grappling with its unionized work force, with foreigners easy candidates for demonization.

 

That explains why the only parties in the running this time were domestic private-equity firms, which are politically more acceptable than their international peers, which faced strict limits on how much of Woori they could buy on their own. In the end, though, only one, MBK Partners, was willing to make an offer. Without any competition to make it a horse race, the government was right to call off the sale.

 

Not all foreigners were put off Woori: Goldman Sachs Group Inc. considered joining MBK and its domestic partners, according to people familiar with the situation, though no firm deal was struck.

 

A few things would help attract more global bidders the next time Woori comes on the block, something that isn't expected until after legislative and presidential elections next year. For one, the Financial Services Commission can make a decision on Korea Exchange Bank. Further delaying Lone Star's planned sale of its KEB stake after eight years of running the bank would be a huge mistake. Even a decision to kill the deal in which the rationale is clear and credible to markets is better than none.

 

In the case of Standard Chartered, the government's best course is inaction. StanChart is in the right to give younger, smarter workers an incentive to do their best, and many in the public will likely support them. The government should stay on the sidelines while they work things out to win backing within the bank, too.

 

When Woori next comes to market, new leaders will be running the country. Who shows up to bid will be a barometer of South Korea's progress by then at making itself a more attractive place for the world to do business.

 

 

[Investmentacct]

Anyone thinks at this price WF is good investment?

 

Thanks and Rgds.