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S. Korea picks Shinhan in bank sale
SEOUL, South Korea -- South Korea said on Thursday it has picked a bid headed by Shinhan Financial Group as the preferred bidder to buy control of state-owned Chohung Bank. But it will push Shinhan to raise the price of its offer. Chohung's management had pressed for a delay in the sale, saying business conditions will improve next year. (Full story) The government wants to sell a controlling stake in Chohung. It owns 80 percent of the bank, which it took over after the 1997-98 Asian financial crisis. On Thursday, the group overseeing the sale, the Public Fund Oversight Committee, picked the Shinhan bid, which also includes French bank BNP Paribas, over a competing offer led by U.S. buyout fund Cerberus Partners. 'Shinhan should pay more'A spokesman for the finance ministry told reporters that Shinhan had offered better conditions on price and other issues. "We have concluded that Shinhan's offer was superior in terms of prices and other conditions," spokesman Ryu Jae-han said, according to Reuters news agency. "But we believe Shinhan should pay more than it had offered." Shinhan has offered to buy the government's whole 80 percent stake for around 2.93 trillion won ($2.4 billion), or around 5,400 won per share. It is expected to pay cash for half of the stake, and offer to swap 0.34 of its own shares for each Chohung share for the rest. The committee said it was trying to minimize other conditions from the Shinhan team. Shinhan will reportedly cut its offer by as much as 10 percent if it finds more debt on Chohung's books. Cerberus had offered 1.73 trillion won ($1.4 billion), or around 5,000 won a share, for a 51 percent stake in Chohung. A major saleThe sale of a majority stake in Chohung will be one of the biggest privatizations since South Korea began its corporate reforms. Shinhan is likely to merge Chohung into its operations, creating a bank with around 130 trillion won ($100 billion) in assets. That would be the second-biggest bank in South Korea, after Kookmin Bank. The government took over Chohung in 1999 with 2.7 trillion won in public money. In all, it spent 157 trillion won ($131 billion) bailing out banks after the Asian crisis of 1997-98. Chohung shares jumped after the announcement but have corrected in late morning trade. They are up 0.52 percent to 4,815 won just after 11 a.m. in Seoul. Shinhan shares are up 1.47 percent to 13,800 won at a time the benchmark Kospi is down 0.92 percent.
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