Posted : 2008-09-19 17:33
Updated : 2008-09-19 17:33

Kookmin, Hana Jockeying for KEB Takeover

By Kim Jae-kyoung, Park Hyong-ki
Staff Reporters

Two major banks ― Kookmin and Hana ― are about to jockey for a takeover of the Korea Exchange Bank (KEB) after HSBC scrapped its deal Friday to purchase a controlling stake from Lone Star.

``We are interested, and will look into possible options for a takeover,'' Kookmin CEO Kang Chung-won told The Korea Times.

Hana Bank CEO Kim Jung-tai also indicated that the bank still remains interested in KEB.

Both lenders competed in a bid for KEB in 2005, with Kookmin winning as a preferred bidder. However, the Texas-based buyout fund cancelled a deal with Kookmin a year after, citing legal issues.

A Seoul official privately hoped that a foreign investor would take over KEB because an outflow of $6 billion following a local bank's acquisition of KEB will further depreciate the Korean currency.

The termination of the deal came after the two parties failed to narrow their differences in price negotiations. Last September, HSBC agreed to buy a controlling 51.02 percent stake in KEB for $6 billion, but recently asked the fund to lower the price, citing falling asset values around the globe.

``In the light of developments around the world, we do not believe that it would be in the best interests of shareholders to continue to pursue this acquisition on the terms negotiated last year,'' said Sandy Flockhart, CEO of HSBC Asia, in a statement.

Following the announcement, Lone Star Chairman John Grayken expressed regrets, saying: ``We are disappointed that HSBC terminated the agreement and that the transaction will not be completed.''

KEB CEO Richard Wacker said, ``We are obviously very disappointed that we have lost the good opportunity. This is a lost opportunity for KEB and Korea.''

However, the latest development has prompted local lenders to once again take on the challenge in taking over KEB.

Lone Star has been caught up in a legal dispute over alleged stock price manipulation involving its credit card unit.

``KEB is too good an acquisition chance for local banks to miss as it will not only boost their asset size but also serve as a platform for overseas growth,'' said Hong Hun-pio, an analyst for Eugene Investment & Securities.

Banks are facing difficulties in raising profitability at home on increasing competition. KEB with strength in overseas operations will provide a big opportunity for local lenders to expand globally, he added.

But analysts say uncertainty remains as to whether local banks can actually bid for KEB, given that the Korean bank had said Lone Star may sell its shares in a block sale if the regulator continues to delay approval.

``If Lone Star chooses to do so, Korean banks will have no chance for a controlling stake in KEB,'' said Hong. ``It will all depend on how Lone Star will make its decision henceforth.''

With Lone Star under growing pressure from its investors, a source had told the newspaper that it considers filing a lawsuit against the government for losses incurred by a delay in the KEB sale. But a Korean regulator ruled out the possibility. ``We have been reviewing the Lone Star-HSBC deal for the KEB takeover sincerely.''
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