Hana-Lone Star deal could be approved in February

By Kim Jae-won

Hana Financial Group is expected to get regulatory approval to buy the Korea Exchange Bank (KEB) from Texas-based Lone Star Funds, perhaps even next month.

“Whatever conclusion we may reach, it is difficult not to approve the deal,” a senior regulator said Sunday. “Approval can’t wait forever.”

He referred to the pending legal review about whether Lone Star should be defined as a non-financial firm.

KEB union members and others opposing the Hana-Lone Star deal claim the private equity firm is a non-financial capital fund so its acquisition of KEB was illegal, calling for the ruling to be retroactively applied and the deal to be nixed.

The official said that the ruling and the approval for Hana’s request for KEB to be made part of the financial group are two separate things. “We will deal with the two separately and there appears to be no ground to reject Hana’s request.”

Yonhap News Agency quoted an official of the Financial Supervisory Service (FSS) as saying that approval will come in February.

The FSS declined comment on the issue. “We will not say anything until we announce our official decision,” said FSS spokeswoman Kim Soo-mi.

By Korean law, a company which has more than 2 trillion won ($1.8 billion) of non-financial assets is classified as a non-financial player and banned from having more than a 4 percent stake in a bank.

Hana has mobilized all its assets to receive regulatory approval for the 3.9 trillion won ($3.4 billion) share purchase agreement, which expires at the end of February.

Its President Kim Jong-yeol offered to step down last week, saying he will “sacrifice” himself for the stalled deal to proceed, though some analysts suspect his sudden resignation may have come from an internal corporate feud.

Suspicions on the success of the biggest acquisition deal in the Korean finance industry are still vibrant.

KEB unionists and politicians from opposition parties have argued that financial regulators should nullify the sale as Lone Star was not qualified to own KEB in 2003 as the U.S. buyout fund possessed more than 2 trillion won of non-financial assets through its property management subsidiary PGM Holdings.

The unionists argue that KEB shares should be sold to the public to prevent Lone Star taking away “excessive national wealth” through premiums on managerial rights.