Hana Financial Group Inc., South Korea's fourth-largest financial services company, is seeking to buy a controlling stake in Korea Exchange Bank (KEB) from Lone Star Funds, a group official said Tuesday.
The U.S. private equity fund has been pushing to sell the 51 percent stake in KEB, the fifth-largest lender in South Korea since 2008. Lone Star's stake is estimated at $3.8 billion based on KEB's current share price.
"Hana Financial is in talks with the U.S. private equity fund to buy the 51 percent stake in KEB," Hana Financial President Kim Jong-yeol said.
Hana Financial Group will make a final decision on whether to take over the bank within the next week, he said, declining to disclose details of the talks.
Regarding the matter, a source at the Financial Supervisory Service, the country's financial watchdog, said, "We understand that Lone Star and Hana Financial are in the process of non-binding negotiations."
Hana Financial's takeover of KEB would require regulatory approval.
Hana Financial, which controls Hana Bank, the fourth-biggest lender in South Korea, reportedly plans to finance the stake purchase with money to be raised through a new share sale.
Hana Financial is also reported to be interested in acquiring a major stake in state-owned Woori Finance Holdings Co., South Korea's largest financial services company, which the government has put up for sale as part of its plan to privatize state companies.
Should Hana Financial acquire KEB, it would emerge as the third-largest banking group in South Korea. As of the end of September, Hana Financial had assets of 200 trillion won, with KEB's assets reaching 116.2 trillion won.
Hana Financial's move to buy KEB came as a surprise to Australia-based Australia & New Zealand Banking Group Ltd., which is widely known as the overriding prospective buyer for the controlling stake.
Lone Star acquired a 64.62 percent stake in KEB for 2.15 trillion won in 2003. The fund unloaded a 13.6 percent share in 2007 in block sales.
British banking giant HSBC Plc. walked out of its plan to take over the stake in 2008, citing too high costs in the onset of the financial crisis.