South Korean banking giant Woori Bank has decided on a complex new deal that will see it selling off a 4% stake in its parent company Woori Financial Group to Taiwanese firm Fubon. The sale is being done purely for strategic reasons according to reports that have originated in South Korea. Woori Bank is one of the most important commercial banks in the country and earlier this month it had bought a 5.8% stake in Woori Financial Group. However, the deal had been done in exchange for Woori Bank giving up its entire stake in Woori Card to its parent company. On September 25, Woori Financial Group made the announcement that its subsidiary Woori Bank will sell the 4% stake to Fubon. Fubon is the insurance arm of the larger company Fubon Financial Holding.
The deal is going to be completed in private, and reports suggest that transfer of ownership will be done before the stock market opens on September 26. An official at Woori Financial Group spoke about the rationale of the deal. He said,
“With the latest deal, we can now attract foreign long-term investors. Woori Financial, which was officially launched this year, has won investors’ trust by improving business performance and raised expectations for a further rise in corporate value as it can expand its business in the non-banking sector in the future.”
The reports do not suggest whether any regulatory clearance is necessary for the transaction to be approved.
On September 10, Woori Bank sold its entire stake in Woori Bank to its parent company. In exchange, it got 5.8% stake in the Woori Financial Group and a cash payment of 600 billion won. The Woori Financial Group shares were trading at 12,350 won each when the deal had been concluded. The reason behind the fast-selling off of the stake that it had acquired is entirely down to the laws pertaining to the Financial Holding Company Act in the country. According to that act, a bank has to sell the stake in a financial group within six months of acquiring it and hence, Woori Bank’s decision to sell it makes perfect sense. This had been responsible for having beaten down the price of the Woori Bank stock over recent days. It has also been reported that Woori Bank is going to sell off the rest of the stake soon.