Lone Star to lower KEB price
US fund to talk to other potential buyers
By Oh Young-jin
Lone Star will look for an alternative buyer while continuing to talk to Hana Financial even after the two’s exclusive contract for negotiations expires at the end of November, a source close to the Dallas-based private equity fund said Sunday.
The source also said that John Grayken, Lone Star CEO, would be willing to sell for a lower price than the one agreed on in the existing contract.
“Lone Star may look for a buyer other than Hana after November and may be willing to accept a discounted offer,” the source said on condition of anonymity, adding that “only Graken knows” whether or not the discount amounts to 1,000 won or more per share.
The government, meanwhile, is strongly hoping for the completion of the deal by the end of the year, other unnamed sources said.
This is the first time that Lone Star has confirmed its stance on a discount and an alternative buyer since last week when the regulator paved the way for its exit out of Korea, although speculation has been rife.
The Financial Services Commission (FSC) ruled last Friday that Lone Star lacked eligibility to be the majority and controlling stakeholder of the Korea Exchange Bank (KEB), giving it six months to sell at least 41.02 percent of its 51.02 percent stake. The KEB ruling followed a court’s guilty verdict on the ex-chief of the private equity fund’s operations in Seoul.
The FSC also told Hana to submit a new application for the KEB acquisition. In the existing Hana-KEB contract, the sale price is set at 13,390 won per share, nearly 40 percent more than the current price of 7,900 won.
The FSC’s ruling is widely interpreted as a call for both Hana and Lone Star to lower the aggregate sale price of about 4.41 trillion won.
Hana officials said that it will try and lower the price through consultations with Lone Star.
Teams from both financial institutions were negotiating even before Friday’s ruling but apparently made little significant progress.
A person close at the inner workings of Hana and Lone Star observed that any figure the former offers should be approved by the FSC in advance.
He said Lone Star doesn’t want to agree to Hana’s offer to see it rejected by the FSC.
FSC Chairman Kim Seok-dong put his job on the line to clear the way for Lone Star’s exit from Korea but it is clear that any misstep in handling the deal could torpedo the whole process.
The National Assembly and some media outlets are up in arms on letting Lone Star walk away with astronomical profits.
The KEB union is also going the extra mile to oppose Hana’s takeover.
Meanwhile, it is a toss-up among analysts about which one between the two has the initiative, with some wondering whether Lone Star is under as much pressure as Hana. Hana needs to take over KEB in order to reach scales of economy and survive in the banking industry, while Lone Star is not likely to find an alternative buyer with Europe and the United States in poor shape.
Some speculate that China, with its banks flush with cash, may be an alternative but it remains to be seen whether Lone Star can find a Chinese buyer in time.