South Korea may initiate Daewoo Securities-Woori Investment merger

The merger eyed jumpstart succeeding alliances in brokerages as the industry suffers lack of global competitiveness.

South Korea may merge Daewoo Securities Co. and Woori Investment & Securities Co. to leapfrog Samsung Securities Co. and spark takeovers in the brokerage industry, the head of the Financial Services Commission said.

“South Korean brokerages lack the scale to become globally competitive,” Kim Seok Dong, chairman of the regulator, said in an interview on April 5. “We’ll encourage industry consolidation through mergers and acquisitions and reduce regulation so they can expand into new businesses.”

Kim, 57, who started his three-year term on Jan. 3, said the nation needs a small number of dominant and competitive investment banks to serve the local financial market and to support South Korean companies in large overseas projects. Contractors for nuclear power plants and urban development projects would be more successful if they had a big South Korean investment bank to work with, he said.

“Creating a bigger securities firm would be a promising first step as we have little knowledge and experience in international deals,” said Chang In Whan, chief executive officer at KTB Asset Management Co. in Seoul, which oversees the equivalent of $11 billion. “Government-led mergers of Daewoo and Woori may trigger industry-wide consolidation.”

A merger of the two firms is “one of the options,” said Kim, who added that he is seeking views from the industry, academic experts and policy makers about how to strengthen South Korean securities companies.

Kim said South Korea’s first big brokerage is likely to appear within his term as head of the regulator. He also said the nation needs to attract financial-industry experts from abroad to bolster skills at local securities firms.

View the full story in Bloomberg.