Gov`t to Sell 23 Pct. of Woori Finance Holdings

The government will pass a resolution to sell 23 percent of its 73-percent stake in Woori Finance Holdings but its management rights will not be affected after the sale.

A top government official said yesterday that the decision is a proactive measure to enable the immediate sale of the stakes if a potential buyer emerges.

“The Public Fund Oversight Committee, which was recently re-launched, plans to reapprove its past resolution to sell a seven-percent stake this month, and additionally pass a resolution to sell another 16 percent this year,” the official said.

The measure is intended to help the government avoid repeating its past mistake of losing the opportunity to sell Woori stakes in 2007 despite surging demand to acquire its shares at 22,000 won (19 U.S. dollars) level due to the limited quota set by the committee.

Woori’s share price dropped to around 5,000 won (four dollars) immediately after the financial crisis last year, but has climbed back to around 16,000 won (14 dollars). The price, however, seems unlikely to return to its level two years ago of above 20,000 won (17 dollars) any time soon.

The government will divide up the 23-percent stake between potential acquirers as soon as they emerge. To alleviate fears over a drop in share prices due to a rise in circulation, the government decided to see whether Woori should support its share price through stock repurchase.

To be reviewed is a measure to diversify the sale of “50 percent plus a single share,” which allows a stakeholder to exercise management rights, to five to 10 long-term investors in and out of Korea.

Few domestic financial companies have the financial capacity to acquire Woori independently, and opposition could emerge against domestic industries or foreign capital taking over domestic banks.

The finance community said that if oligopolistic governance is formed with stakeholders with similar shares participating in management such as the national pension, sovereign wealth fund and foreign investment banks, it will be effective in preventing complacency among principal stakeholders.

legman@donga.com