Carlyle, JPMorgan in $2.73bn Korean bank exit

The two firms are leading an investor consortium that has agreed to sell its stake in South Korean commercial bank KorAm Bank to Citigroup, realizing a hefty profit.

The Carlyle Group Asia and JP Morgan Corsair II Offshore Capital Partners, an international investment affiliate of JP Morgan & Co., are leading an investor consortium that has agreed to sell its 36.6 percent stake in South Korean commercial bank KorAm Bank to Citigroup in a transaction valued at $2.73 billion (€2.18 billion).


Citigroup will pay KRW 15,500 per share in cash, for a total of KRW 3.18 trillion. The price per share is a 6.7 percentage premium over the average closing price of KorAm stock on the Korean Stock Exchange for the last 30 trading days, according to the press statement. The deal is expected to close in the second quarter of 2004.


“Citigroup’s decision to acquire KorAm is a significant vote of confidence in the Korean economy,” JP Morgan Corsair president D.T. Ignacio Jayanti in the statement. “This transaction represents a strong validation of the Carlyle-Corsair consortium’s investment thesis, and speaks to the potential for private equity to play a constructive role in the restructuring of banking systems globally.”


KorAm is the sixth largest commercial bank in South Korea, with 222 domestic branches and total assets of KRW 43 trillion (€29.05 billion).


Carlyle Offshore Partners, an investment vehicle established by Carlyle Asia, originally led the investment consortium into the KorAm deal back in 2000, when it put down approximately $302 million in equity, followed by JP Morgan Corsair, which committed about $100 million.


At the time, the KorAm investment was the largest Carlyle deal in pure equity terms. According to a Carlyle spokesperson, the sale represents a 2.2 times return on equity invested.


Carlyle had originally made a bid by itself in March 2000 valued at KRW 500 billion for KorAm, which at the time would have given the private equity firm a 34 percent stake in the company. The government turned down the deal because South Korean law prohibits foreign non-banking institutions, such as Carlyle, from acquiring more than a 4 percent interest in a Korean bank. However, after Carlyle brought together the consortium, the government eventually agreed to the terms of the deal.