What's in the way of Hana-KEB integration?

Unionists from Korea Exchange Bank (KEB) gather in front of the office of President-elect Park Geun-hye’s transition team in Samscheong-dong, Seoul, Thursday, to file a petition opposing Hana Financial Group’s plan to increase its stake in KEB to 100 percent and delist it from the stock market. / Courtesy of KEB

Union claims former chairman still has say in management

By Kim Tae-jong

When Hana Financial Group took over the Korea Exchange Bank (KEB) in February 2012, market participants believed the merger was a good move for the group to become a major player. But what was less clear was the probability of a successful integration.

Many point out that this did not look easy due to KEB’s militant union and cultural differences. For that reason, Kim Seung-yu, then chairman of the group, decided to opt for a two-bank system for five years under the umbrella of Hana.

Just one year has passed since the announcement of the merger, but it seems that there exists a greater chasm between the two banks, indicating the group has failed to overcome integration challenges and create synergy.

With escalating conflicts between the two parties, questions are being raised as to what there is in the way of a peaceful, fruitful union?

Whenever Hana announced measures for the integration process, KEB unionists claim that its new owner was violating the bilateral agreement on independent management.

The latest clash between the two sides took place after Hana announced last month its intention to own 100 percent of the bank through a share swap and delist it from the stock market.

The union criticized the move, arguing Hana’s additional purchase of KEB shares will run against the management guarantee.

“They’re pushing forward with the plan by force, even though it violates the agreement,” union official Kim Bo-heon said. “We will keep fighting until they withdraw the plan.”

The union filed a petition with President-elect Park Geun-hye’s transition team Thursday, voicing its opposition to the delisting plan.

“The share swap will cause damage to minority shareholders and it will also harm transparent management,” the union said in the petition.

It also alleges that former Hana Chairman Kim has masterminded the plans for the integration steps that have been the main source of conflict.

“He still has a say in the management of Hana even after retiring,” the KEB union official said. “He takes advantage of his personal networks to mastermind various schemes and has consequently ruined everything.”

Market insiders also allege that the former chairman still has a direct and indirect influence on management.

“Kim has shown up at various events organized by Hana and was even escorted by a personal secretary from the company. It seems that he still has influence on decision-making at the group as a man who made the lender one of the top four financial groups from being a minor bank,” an industry insider said.

Escalating conflict

The conflict between the two will peak in April when Hana plans to buy the additional 40 percent stake in KEB through the share swap.

Hana plans to raise its stake to 100 percent by swapping one its shares for 5.28 KEB shares if it gains approval during a shareholders’ meeting on March 15.

The lender argues that the deal does not harm the independent management of KEB as this was essentially about KEB maintaining its brand, employment compensation levels and operating systems until 2017.

“It will be executed through a share swap, and the move aims at helping boost the group’s share price by dispelling uncertainty and raising the value of the group,” a Hana spokesman said.

Since the acquisition, bad blood has continually surfaced between the two banks.

The KEB union opposed Hana’s plan to merge the information technology departments of the two banks last September.

They also demanded Hana should withdraw a plan to have KEB donate 25.7 billion won to Hana Academy Seoul, a private high school run by Hana that Kim is now chairman of.

Hana has retreated so far whenever facing strong opposition from the unionists.

It scrapped the plan to merge the information technology departments just a month after KEB unionists started to protest.

The union filed a petition with the Financial Services Commission, arguing KEB’s donation to Hana Academy Seoul was illegal, and the financial regulator later ruled that the plan violated banking laws in December.

Observers say that the different office culture of the two financial companies makes it hard for them to cooperate.

They say the lenders are each very proud as Hana has grown to be the third-largest financial group in the country from a tiny moneylender in four decades through successful mergers and acquisitions. In contrast, KEB has a bureaucratic manner as it originated from the Bank of Korea.

“Hana may have approached this merger with confidence after having acquired and integrated Boram and Seoul banks in the past. It is not obvious whether such an experience will help or hurt the KEB takeover. This one could be extraordinarily challenging,” a local bank executive told The Korea Times.