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By Lee Hyo-sik
Staff Reporter
With the global financial meltdown showing signs of abating around the world, CEOs of local financial groups are rolling up their sleeves again to find a potential target for merger & acquisitions (M&A) in order to get the upper hand in the post-crisis era.
Following the collapse of Lehman Brothers a year ago, they tried to grow organically by creating positive synergy effects among existing units under strict risk management, shunning acquiring other businesses.
But they are now beginning to realize that the organic growth approach will not be effective to capitalize on the upcoming boom period and that to become a market leader, they have to resort M&A.
Currently, Korea Exchange Bank (KEB), Prudential Investment & Securities and Prudential Asset Management, among others, are on sale, with multiple parties showing interest in acquiring them.
In particular, the nation's fifth largest lender, controlled by U.S. private equity fund, Lone Star Funds, is attracting keen attention from Kookmin Bank, the Korea Development Bank (KDB) and other leading banks here for its expertise in foreign exchange dealing and extensive overseas networks. Lone Star CEO John Crayken recently said he would like to dispose of a 51.02 percent controlling stake in KEB in 2010.
Growing interest in KEB is expected to force the acquirer to pay much higher than the bank's market value. But it will make Lone Star Funds, which has tried to unload its KEB stake for years, happy as it has not been able to so because of legal troubles here.
Among potential buyers of KEB, Kookmin Bank is said to lead the pack as the nation's largest retail lender has long been saying that it would like to have another shot at taking it over in a bid to emerge as a globally competitive financial institution.
Kookmin signed a contract with Lone Star in 2006 to purchase the majority stake from the private equity fund. But the deal failed because of a prosecutors' investigation into the fund's alleged violation of laws in 2003.
But Korea's biggest commercial bank now wants to get a second chance. Kookmin Bank CEO Kang Chung-won said in a local conference last Tuesday that the lender has been preparing to purchase KEB for the past three years, vowing to make it part of the Kookmin family.
``We are confident, as a leading financial group, that we will be successful in acquiring KEB. To create synergy and become a globally competitive entity, it is necessary to buy the lender,'' Kang said. On top of KEB, Kookmin has also expressed interest in acquiring Prudential Securities and Asset Management to beef up its non-banking business.
But Kookmin's bid for KEB will likely face strong competition from other domestic banks. KDB CEO Euoo-sung said in a local forum last Friday that he is open to taking over KEB.
``We are open to all possible M&A deals at home and abroad. We would like to strengthen home base first and then make inroads into foreign countries. We are particularly interested in KEB,'' Min said.
Another possible KEB acquirer is Hana Financial Group, which has been seeking to enlarge its size to better compete with the top three financial groups, Kookmin, Shinhan, and Woori. Hana Financial Group is reportedly considering issuing new shares to secure up to one trillion won to finance its expansion.
The National Agricultural Cooperative Federation, or Nonghyup, is also said to be interested in KEB to strengthen its credit and foreign exchange-related businesses.
It is currently moving to divide itself into two entities ― a bank and an agricultural produce distributor. Under the plan, its credit business will separate from the company in 2012 and become a financial holding company.
At a recent meeting with reporters in New York, Woori Financial Group Chairman Lee Pal-seung also said, ``The group plans to make forays into overseas market by taking over a foreign bank next year.''
leehs@koreatimes.co.kr
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