Regulatory review on KEB deal delayed
Hana may have to pay Lone Star more
By Kim Jae-won
Financial regulators will not be able to meet the February deadline for their approval of Hana Financial’s purchase of the Korea Exchange Bank (KEB) from the Dallas-based Lone Star private equity fund. The delay could give Lone Star an edge to push for a higher price, according to some industry watchers.
“We are examining the financial stability and fiscal soundness of Hana Financial,” said Kim Dong-hyun, head of the financial group team of the Financial Services Commission (FSC), who is in charge of the deal examination.
“We are also letting the Fair Trade Commission check whether or not the deal violates anti-trust regulations,” Kim said, indicating that FSC approval, if it ever comes, will not be issued in March.
Kim said that the February deadline, floated by Hana, is not something his commission will heed, adding that the regulators will do their best to leave no stone unturned regarding the legality of Hana’s KEB purchase.
Yonhap News Agency reported last week that the financial regulators’ approval, if it is ever given, would come in April or May.
Hana made a surprise deal to pay 4.69 trillion won ($4.2 billion) deal for Lone Star’s 51.02 percent stake of KEB. Hana Financial had vowed to receive regulatory approval around February for the contract sealed on Nov. 25.
Hana Financial needs regulatory approval to finalize the acquisition. Financial authorities are looking into Hana Financial's eligibility to become the biggest shareholder of KEB, and the validity of the group's acquisition funding plan along with the transaction's impact on Hana Financial's fiscal soundness.
"Hana requested for approval sometime during February, but we can only finalize it by late March at best, or early April," a financial regulation official was quoted by Yonhap as saying.
The delay in the regulatory process adds concerns of an additional financial burden on the fourth-largest financial group by assets in the nation.
By contract terms with Lone Star, Hana is obliged to pay an additional 32.9 billion won, or 100 won per share, for the stake, should regulatory approval come one month later than March. A two-month delay could drive additional costs to total 65.8 billion won.
Hana Financial said the group will make every effort to obtain the approval as soon as possible.
“We will submit whatever documents the regulator wants. We hope it is done as soon as possible,” a spokesman of Hana Financial said.
Meanwhile, the KEB labor union, which is against the merger, argued that Hana Financial agreed to cooperate with Lone Star not to pay taxes for capital gains, which they would earn from selling the stake.