Hana-KEB merger put on hold

By Kim Jae-won

A court ordered Hana Financial Group, Wednesday, to stop its merger with the Korea Exchange Bank (KEB) following a petition filed by KEB union members.

The union accused Hana of breaking a three-year-old agreement between the sides.

The Seoul Central District Court said there was no reason to nullify the agreement to guarantee five years of autonomy for KEB. Hana Financial agreed with the KEB union to keep the lender independent until February 2017 after buying a 51 percent stake in it from Texan buyout firm Lone Star Funds for 3.9 trillion won.

“The agreement was signed after a long dispute between Hana management and the KEB union through the mediation of the Financial Services Commission (FSC). We find no reason to nullify it, considering its content and background,” said the court in its ruling.

The injunction is effective for the first half of this year, according to the court. The union said it filed a petition with the court last month, asking for a tentative order to stop the merger process.

The court’s decision effectively bans Hana Financial from any proceedings related to the merger, including holding a shareholder meeting to complete the process.

The nation’s third-largest financial group by assets had sought preliminary approval from the FSC, which was expected to make its decision later this month.

Hana Financial said it was embarrassed by the ruling.

“The ruling came unexpectedly, so we did not expect the result. We will now decide how to deal with it after a review,” said a Hana spokesman.

The KEB union meanwhile welcomed the order.

“We praise the court’s courageous decision made by law and principle. With the decision, we expect the abusive activities of management to be corrected,” it said in a statement.

Analysts said this will hurt Hana’s plan to cut costs through the early merger.

“Hana expected to reduce costs and raise efficiency with the merger, but now we cannot see any growth momentum in the group,” said Daishin Securities senior analyst Choi Jeong-wook.

Hana has been trying for an early merger, claiming it would raise efficiency while the KEB union has opposed the move and accused the financial group of breaking its promise.

Shares of Hana Financial slipped 250 won, or 0.78 percent to close at 31,900 won on Wednesday on Seoul’s main bourse, with the benchmark KOSPI gaining 0.55 percent to 1,962.79.