1. FSC Chairman Jun Kwang-woo
2. Lone Star Chairman John Grayken
3. Kookmin Bank CEO Kang Chung-won
4. Hana Holdings CEO Kim Seung-yu |
 Wall Street Meltdown Cause for HSBC’s Withdrawal Before Deadline
In a breath-taking turn of events amid the Wall Street Crisis, HSBC Holdings has ditched its bid for Korea Exchange Bank, leaving the field clear for two Korean banks ― Kookmin and Hana. ― Korea Times Finance Reporter Kim Jae-kyoung takes a look at the situation.
Lone Star's stalled effort to sell a controlling stake of Korea Exchange Bank (KEB), the fifth largest by assets, has come back to square one. HSBC Holdings, one of the world's top British banks, has given up its bid to purchase the bank from Lone Star, a Dallas, Texas-based fund. But, this time, the cause of the broken deal was not so much the Korean government's bureaucracy as the unfolding turmoil on Wall Street.
In a statement, HSBC cited the change in the global financial markets as the reason why it was ditching the KEB deal. As a matter of fact, KEB shares closed at 11,350 won per share Friday, compared to 18,045 won, the purchasing price per share agreed between HSBC and Lone Star to buy the Korean lender on Sept. 3 last year.
During months of this financial saga, Financial Supervisory Commission Chairman Jun Kwang-woo, top regulator and a globalist by Korean standards, tried to push for the sale, at least twice saying in public that the Korean government's approval was near, but his calls didn't go through. Jun believed that a fast settlement of the KEB sale would improve the confidence of foreign investors, who most cite the stalled KEB deal as a Korean case of xenophobia.
Now, it looks likely that the government will take time to approve any deal after new suitors appear. One reason is that it will be difficult to get a good price amid a growing number of financial institutions being put up for sale around the world. So a likely scenario is that the next round of bidding will draw an all-Korean field of suitors, with Kookmin Bank, the biggest lender who tried in vain to take over KEB, and Hana Financial, the fourth largest bank that desperately needs a new area of growth.
However, the underlying reason for HSBC pulling back from the deal was that the government missed the sales timing by delaying approval of the deal on the pretext of legal uncertainties and anti-foreign capital sentiment among the public.
In addition, nationalism widespread among policymakers and financial regulators is another key culprit behind the rupture of the deal.
`When we need money, we are very business friendly, but after they have made the investment, we certainly become a nationalistic country and hate foreign capital somehow,'' Kim Hee-jip, country managing director of Accenture Korea said in a recent interview with The Korea Times.
Comments by one ranking policymaker exemplifies such nationalism. ``I don't think that it would be desirable for KEB to be in the hands of foreign investors,'' said a ranking government official on condition of anonymity.
Market experts said the global market condition, government's inconsistent policies and nationalism all combined to make HSBC walk away from the KEB deal.
They stressed that if Korea wants to play at a global level, both Korean policymakers and the public should drop their nationalistic thought and equip themselves with a global mind-set.
``We all agree that the world is a much bigger market for us to play in than just remaining locked in our own backyard,'' Market Force Company James Rooney said.
``It is time for the artificial barriers and unreasonable issues to be moved out of the way, and for Korea to start making practical, positive progress towards letting its domestic financial institutions become world-class players,'' he added.
With the rupture of the KEB deal, chances are that Lone Star will take the Korean government to court as the termination is expected to incur a huge loss for the Texas-based fund. The fund had to give up managerial right premiums, which is estimated at 1.2 trillion won, 23 percent of the agreed-upon sales price.
Earlier in July, Lone Star sent FSC Chairman Jun a letter saying that it would file a lawsuit against the government if the delay of approval incurs losses.
In an earlier email inquiry on whether Lone Star was considering suing the Korean government, chairman John Grayken neither admitted nor denied, saying, ``I am not available for an interview at this time.''
Given that the U.S. buyout fund has faced mounting complaints from investors due to the delay of cashing out their KEB investment, it is likely that Lone Star would sue the Korean government for potential losses.
According to an informed source, Lone Star investors had demanded that the fund dispose KEB shares by either returning its KEB shares or conducting a block sale if the deal is delayed beyond September due to legal problems.
However, the possibility still remains that Lone Star will try to find a buyer of its controlling stake in KEB as big local lenders have shown interest in the nation's fifth largest lender after the termination was announced.
``We are interested in the KEB takeover. If KEB is put up for sale, we will consider buying it depending on what's happening in the market,'' Kookmin Bank CEO Kang Chung-won told The Korea Times over the phone.
A ranking executive at Hana Financial Group also hinted that it has interest in KEB, saying, ``Hana is now cautiously reviewing the takeover of KEB.''
kjk@koreatimes.co.kr
|
[단독] 르노삼성, 본사 모델로 한국 공략
