By Kim Jae-kyoung
Hana Financial Group said Wednesday that it will sign a share purchase agreement with Lone Star Funds today to take over a controlling 51.02 percent stake in Korea Exchange Bank (KEB).
The group said that its board approved the plan to acquire the nation’s fifth largest lender, which will make Hana the third largest banking group in the country, edging out Shinhan Financial Group.
“The negotiations have been finalized. What’s left is only the signing process,” Hana Chairman Kim Seung-yu told reporters at Incheon International Airport Wednesday before flying to London. Kim will sign an official sale agreement with Lone Star Funds Chairman John Grayken in London at: 11:00 am (local time) to finalize the Korean won-based transaction.
“The takeover price is finalized but I cannot make a comment on that at this moment due to a confidentiality agreement with Lone Star,” he added.
Through public disclosure, the group said that the takeover price is expected to be somewhere between 4.65 trillion won and 4.75 trillion won, meaning that Hana will pay around 14,000 won per KEB share.
But if the Export-Import Bank of Korea, the second-largest shareholder of KEB, exercises a tag along right on its 6.25 percent stake, Hana will have to pay a total of 5 trillion won for a 57.25 percent stake.
A tag along right, also known as co-sales right, refers to a contractual obligation used to protect a minority shareholder. If a majority shareholder sells his or her stake, then the minority shareholder has the right to join in the transaction and sell his or her minority stake in the company at the same time.
Kim said that he plans to operate the banking unit Hana Bank and KEB separately under the same wing for the time being.
“In principle, we will maintain two banking units. I think it is important to protect the corporate value of each company. Details regarding post-merger integration plan will be announced later,” he said.
Hana said that it plans to apply for a regulatory approval of the deal, including its funding plan, Thursday, as soon as the two chief executives sign the sale agreement. Given that it takes two or three months to get approval, Hana will be able to take full control of KEB in January at the earliest.
Regarding its funding plan, Kim said that Hana will sell bonds and seek financial investors to raise funds needed to pay for the stake.
"We are in contact with investors to raise funds for the KEB acquisition and (the funding) will be handled without any trouble. But we will not rush as Hana shares are on the rise,” Kim said.
Hana shares soared by 2,700 won or 7.3 percent to 39,700 won Wednesday from the previous close, while KEB shares fell by 150 won or 1.21 percent to 12,200 won. Hana shares have gained more than 8,000 won during the last eight trading days.