HSBC in Lobbying Pitch to Conclude KEB Takeover
By Kim Jae-kyoung
Staff Reporter
With the sale of the Korea Exchange Bank (KEB) deadlocked, international lobbyists for HSBC have been stepping up pressure on the government to conclude the Lone Star case as early as possible.
They claim that the case is the perfect example that shows Koreans' hostile attitude to foreigners reaping huge gains via investment in ailing Korean firms, urging the government to speed up the sale.
The Texas-based buyout fund has been barred from selling its controlling stake in KEB to HSBC, due to ongoing court proceedings on its alleged questionable takeover of KEB in 2003.
One of the most vocal lobbyists in favor of the sale of the KEB is Phil Gramm, a former UBS vice chairman.
Gramm, also a former U.S. Senator and currently an economic advisor to Republican John McCain, bewildered President Lee Myung-bak during his visit to New York in April
At a luncheon meeting with President Lee, Gramm, who was sitting at the same table with Lee, complained about Korea's investment environment for foreigners and expressed discontent about the delay of the KEB sale.
Gramm was then a vice chairman of the Switzerland-headquartered global investment bank, which is acting as a financial adviser for HSBC. He deregistered as a lobbyist for UBS in late April to join McCain's election campaign.
``I was sitting at a table next to President Lee's, and I saw Gramm strongly urging Lee to let Lone Star sell off the KEB,'' a local company CEO who attended the luncheon meeting told The Korea Times on condition of anonymity.
``Given that he was vice chairman of UBS, an advisor for HSBC, I consider his attempt to be lobbying activity to have the government speed up the sale,'' he added.
President Lee chose not to respond when asked about his stance on the Lone Star case. Instead, Financial Services Commission Chairman Jun Kwang-woo answered that he would try to find effective measures to conclude the Lone Star issue.
David Eldon, chairman of the Dubai International Financial Center Authority, although he strongly denies it, is seen as another lobbyist for HSBC due to his background as an employee an its chairman for over 37 years.
He participated in President Lee's power transition committee, which raised speculation that Eldon would play a role in HSBC's attempt to take over Lone Star.
In a recent interview with The Korea Times, Eldon cautiously commented that Lone Star's legal trouble concerning the sale of KEB is an important factor in the minds of potential investors.
``If the matter does not get resolved quickly, new potential investors will not come to Korea. It seems there is a degree of unanimity in their opinions that Lone Star has been investigated and there is no evidence to support any further claims against it,'' he said.
The London-based Financial Times (FT) recently reported that HSBC is considering giving up the $6.2 billion acquisition of KEB if the deal is not given government approval within weeks.
The HSBC remark is seen as an attempt by the British banking giant to urge the Lee administration to approve the long-delayed KEB acquisition deal as early as possible.
Concerns are brewing as to whether attempts by these lobbyists may force the government to conclude the Lone Star case in a hurried manner.
On May 28, People Action, a civic group established to clarify suspicions regarding the Lone Star case, said that remarks by Lone Star and HSBC on a possible rupture of the deal ahead of the contract expiration is a strategy to put pressure on the government.
Market experts said that it is not fair to exclude local banks from the bidding race for the KEB takeover.
``I think the government should give an equal opportunity for a local player to take over the KEB,'' a local bank executive official said, asking not to be named. ``It is reverse discrimination in favor of foreign investors.''
Lone Star was recently found guilty of stock price manipulation involving its acquisition of KEB's credit card unit.
After the Seoul Central District Court handed down the verdict, financial regulators said they would delay making any decisions on whether to approve the planned sale of KEB to HSBC until a final ruling on an appeal.
Mean-while, Kim Sun-gyu, spokesman of KEB said, "Domestic banks have already had opportunities to join in the bidding race to take over our bank, but they missed. All of our management and employees strongly believe that HSBC's acquisition is far better for our development compared to an acquisition by a domestic bank.''