Min has no interest in KEB takeover

By Kim Jae-kyoug

Staff Reporter

Lone Star Funds Chairman John Grayken may now feel anxious as his third attempt to sell off the fund's controlling 50.02 percent stake in Korea Exchange Bank (KEB) is likely to go adrift even before the bidding process begins.

Heads of all major local banks, which have been considered potential buyers of the nation's fifth largest lender, have expressed their intention not to participate in the takeover bid for the once most popular mergers and acquisition (M&A) target.

Korea Development Bank CEO Min Euoo-sung recently said that he has no intention to join in the bidding race. ``We already told Lone Star that we would not partake in the bidding race. I don't think it is desirable for the state-run lender to purchase it at such a high price,'' Min told reporters Friday during a visit to Uzbekistan.

Hana Financial Group Chairman Kim Seung-yu also signaled that the group would not participate in the bid, saying, ``We have yet to consider the takeover of KEB and Woori Financial Group.''

``An M&A is one of many alternatives but what is more important is synergy creation after the merger. Post-merger integration should be considered as more important than the M&A itself,'' he added.

Shinhan Bank CEO Lee Baek-soon ruled out any possibility of a takeover. ``It is possible that a bank can enhance competitiveness by enlarging its size through an M&A. However, for Shinhan, now is not the time to pursue another M&A because we took over Chohung Bank and LG Card not long ago.''

KB Financial Group, the nation's largest financial holding company, is also unlikely to participate due to a management vacuum. It said Wednesday that its chairman recommendation committee will select its new head by mid-June.

It still remains to be seen whether remarks by local bank CEOs are tactics to lower the takeover price. But what is obvious is that the odds are not in favor of Grayken and his investors who are keen to cash out their investment made five years ago.

Market volatility

The biggest reason Lone Star resumed its efforts to sell off KEB in early April was a recovery in the global financial market. However, the financial market has recently turned volatile due to concerns over the debt crisis in Greece and other European countries, sending a shudder through the local market.

KEB shares closed at 13,400 won per share Thursday, down from 14,400 won on April 21. It was well below 18,045 won, the purchasing price per share agreed between HSBC and Lone Star to buy the Korean lender in 2007.

The exchange rate is another hurdle as the fund is worried about the foreign exchange losses. The won closed at 1,141.3 won per dollar Thursday, up 25.8 won from the previous day. When it signed a contract with HSBC, the won was trading at around 950 won.

If the volatility continues, chances are that foreign investors will scrap their plans to invest in emerging markets on concerns that the global economy will face another financial turmoil.

Due to local banks' lukewarm attitude and sudden market volatility, the Texas-based fund is already behind schedule. ``The fund was originally scheduled to send out an information memorandum for those submitting confidentiality agreements (CA) by mid-April. But it has yet to send them out,'' a source close to the matter told The Korea Times, asking not to be named.

In early April, the fund sent out teaser letters with CAs to six local financial groups, including KB, Shinhan, Hana, Korea Development Bank (KDB) ― and 50 foreign investors, including Australia and New Zealand Banking (ANZ) Group. But few investors returned them.