BC Card letdown adds to Vogo’s woes (2024)

Vogo, which claims to be the largest among the independent ``Korea-dedicated’’ buyout funds, is headed by former finance ministry bigwig Byeon Yang-ho, noted for his role in handling the controversial sale of the Korea Exchange Bank (KEB) to the Texas-based Lone Star Funds in 2003.

BC Card letdown adds to Vogo’s woes (1)
Byeon Yang-ho,
managing partner of Vogo Investment

By Kim Tong-hyung

Backed by an all-star team of high-profile former bureaucrats and finance industry people, the Vogu Fund had set out with confidence about hitting the gold trail. Five years into its existence, however, the Korean buyout firm continues to underwhelm, with its latest setback delivered courtesy of telecommunications giant KT.

Vogo, which claims to be the largest among the independent ``Korea-dedicated’’ buyout funds, is headed by former finance ministry bigwig Byeon Yang-ho, noted for his role in handling the controversial sale of the Korea Exchange Bank (KEB) to the Texas-based Lone Star Funds in 2003.

It had competed fiercely with KT over acquiring a commanding share in BC Card, a major credit-card service that involves the businesses of 11 member banks.

After months of intense squabbling, the dust is beginning to clear, and Vogo is seen licking its wounds as KT prepares to walk off with the lion’s share. The game-changer was Woori Bank, which owns 27.65 percent of BC Card. The bank recently announced it plans to sell most of its shares to KT, which already has a 5 percent stake.

Shinhan Card, which holds a 14.85 percent share in BC Card, is also expected to sell most of its shares to KT ― the two companies inked a memorandum of understanding (MOU) in February over the process.

Atop of the 20-percent share it looks to be getting from Woori, acquiring Shinhan’s 14.85 percent share would make KT the biggest shareholder of BC Card over the Vogo Fund, which currently holds a 24.57 percent share and about 30 percent when friendly shares are included.

It remains to be seen whether Shinhan would be willing to unload its entire shares in BC Card to KT. However, the country’s biggest telephone company is also in talks with Kookmin Bank and Busan Bank to acquire their shares of BC Card as well, according to industry sources.

KT is determined to make a splash in the credit card business, matching a move by telecommunications rival, SK Telecom, the mobile telephony king, which is collaborating with the Hana Financial Group to gather customers for the new Hana-SK credit card.

BC Card has been considered an ideal fit for KT, as its member banks combine for about 39 million credit card customers and a massive sales network consisting of around 2.5 million shops.

``We will move our shares to KT once Woori completes the sale of its shares as well, so we are monitoring how the talks are progressing between Woori and KT,’’ said a Shinhan official.

``It hasn’t been decided yet whether we will sell all of our shares to KT or just a portion of them like Woori intends to do. Since KT already has a 5 percent share it acquired from provincial banks, however, it won’t need too many from us to become majority shareholder.’’

Vogo is clearly frustrated to see KT flexing its larger muscles. The buyout firm had attempted to acquire BC Card since purchasing shares owned by Hana Bank, the flagship of Hana Financial Group, and SC First Bank, the Korean arm of Standard Chartered, last year.

However, Woori, Shinhan and other major BC Card shareholders weren’t willing to allow Vogo to call the shots. The relationship between the fund and other shareholders has deteriorated over several issues, including the number of seats Vogo gets on BC Card’s board.

``The involvement of the cash-rich KT in the BC Card picture has certainly been a letdown for Vogo, as the presence of the telecommunications giant benefited shareholders who had been negotiating with the buyout fund by giving them more leverage,’’ said a finance industry official.

``BC Card basically handles the sales network and transactions processes for the credit cards issued by the member banks. So allowing an outsider to take a commanding share in BC Card is certainly a tricky matter as it could affect future negotiations over commissions and other issues, and the banks have apparently decided that KT is less threatening.

``Even after acquiring a commanding share in BC Card and retaining the right to name the chief executive officer, KT is likely to maintain its partnership with banks, as BC Card will basically become a shell should the banks remove their hands from it.’’

BC Card is one of the five Korean companies Vogo has invested in since its establishment in 2005. The results of its investment so far have been mixed.

Vogo could expect some returns from Siltron, a semiconductor material firm it jointly established with LG Electronics, which is scheduled for an initial public offering (IPO). The fund also invested in Novita, the country’s second-largest seller of bidets, and is beaming after witnessing the company enlarge its market share to 30 percent.

However Vogo’s decision in 2007 to invest in iRiver, a maker of digital music players, proved to be disastrous as the company has since been swept to the pavement in the global market by Apple’s iPod and other competing devices. Vogo is also looking at less-than-expected returns from its investment in Tongyang Life Insurance as it does with BC Card.

BC Card letdown adds to Vogo’s woes (2024)


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