Korean law firms Lee & Ko and Shin & Kim have both been awarded advisory roles on the landmark privatisation of Woori Finance Holdings (WFH), the country’s largest bank, fending off eight other law firms including Kim & Chang, Bae Kim & Lee and Yulchon to win the mandate.
Both firms were announced as the successful bidders on 16 August 2010. Shin & Kim will be advising on the sale of WFH while Lee & Ko will act on the government’s sale of its stakes in two regional banks: Kwangju Bank and Kyongnam Bank.
It is understood that both firms’ relationships with WFH, or related entities, were a major factor in their successful bids. Lee & Ko, for instance, has been involved in a number of major privatisations where the Korean Deposit Insurance Corporation – the government body that owns a 60% stake in WFH – was either a client or a counterparty. The firm represented KDIC in the sale of its stake in Korea First Bank and also acted for the purchaser in the sale of KDIC’s stake in Korea Life. The firm was also involved in the establishment of WFH back in 2001 and has been advising the holding company on various aspects since then.
The KDIC and the Korean government are also regular clients of Shin & Kim, with the firm having advised on the sale of Seoul Bank to Hana Bank, the sale of Chohung Bank to Shinhan Bank and the sale of two mutual savings banks (Yehanul and Yeareum).
WFH was created in 2001 via the forced mergers of four commercial banks and an investment bank (Hanvit, Peace, Kwangju and Kyoungnam Bank as well as Hanaro Investment Banking and its subsidiaries). The banks were taken over and recapitalised by the government after falling below the 8% – mandated capital adequacy ratio stipulated in the Basel I Accord.
The KDIC is seeking to sell its entire KRW6.8trn (US$5.8bn) stake in WFH and is expected to announce its preferred bidder in March 2011. Bidding is open to both foreign and international investors.
Lawyers ALB interviewed expect the privatisation to trigger a big bang in the Korean banking sector, suggesting that it will almost certainly lead to a reshaping of the industry.
Chang Yong Jae, a partner at Lee &Ko, said that the deal will be a “catalyst for the restructuring of the Korean banking sector,” noting that “whoever takes control of [WFH] will become the industry leader [by size.]
Yi Seong Hoon, an M&A partner with Shin & Kim, also believes that the sale may be the catalyst for further M&A in the sector. “The acquiring bank will be a number-one finance holding company in Korea,” he said. “This will accelerate other market players’ efforts and trials for expansion.”ALB
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