Block sale of KEB shares possible

The head of Korea Exchange Bank has said that Lone Star may have no choice but to go for a block sale of the bank's shares if the deal with HSBC fails to materialise.

Lone Star, the US private equity firm, could opt to sell its controlling stake in Korea Exchange Bank (KEB) through a block sale of the bank’s shares if its proposed sale to HSBC is not approved by regulators soon, KEB’s chief has said.

Bloomberg reported Richard Wacker, chief executive officer of KEB as saying, “A block sale is certainly an alternative, I think, one they would prefer not to pursue.”

“But they may have no choice,” he added.

In August 2007, Lone Star was about to sell its stake to HSBC for $6.3 billion (€4 billion), a deal which did not materialise due to regulatory hurdles confronting Lone Star as a result of persistent controversies dogging the firm’s 2003 $1.2 billion acquisition a 51 percent interest in the Seoul-based bank.

The deadline for the completion of the transaction was extended from 30 April to July 31, by which date if all regulatory approvals are obtained, the two firms will extend the completion deadline to two months from the date of approval.

Late last month, the Seoul High Court cleared Lone Star of stock price manipulation of KEB’s former credit card unit, overturning the decision of the South Korean Central District Court. However, the case is now in the Supreme Court as prosecutors have filed an appeal against the ruling of the Seoul High Court.

As such, it is improbable that Lone Star will be cleared of all charges prior to the deadline of July 31, compelling the firm to consider a block sale of shares to dilute its stake.

Wacker said that though a block sale may be the only option available to Lone Star, “it is not a good outcome for the bank.”