HSBC is in discussions with US buyout firm Lone Star about the possible acquisition of a majority stake in Korea Exchange Bank, Korea’s sixth largest bank by total assets, the two parties have confirmed.
Lone Star holds a 51 percent stake in Korea Exchange Bank, after selling a 13.6 percent stake in June at 13,600 Korean won per share and using the $1.3 billion proceeds to pay down its debt.
The US-based private equity firm was set to net over $4 billion in profit from an agreed $7.3 billion sale to rival Kookmin Bank, before Korean prosecutors stepped in to block the transaction on the grounds that the original investment was flawed.
“The discussions are ongoing and, if agreement is reached, the transaction would be conditional, inter alia, on obtaining the necessary regulatory approvals in Korea and elsewhere,” HSBC said.
John Grayken, chairman of Lone Star, said today: “I can confirm that we are in exclusive discussions with HSBC with regard to the sale of our 51.02% stake in Korea Exchange Bank.”
He added: “The discussions are timely. Lone Star bought KEB in 2003. At that time, the bank was near bankruptcy and Lone Star was the only buyer willing to invest. Our role was to rescue the bank and turn it around. KEB’s management and employees have done a brilliant job in achieving this. KEB is now one of the top performers in Korea and it is now time for Lone Star to sell its share to a strategic investor which can bring the bank to a new level of competitiveness”.
The controlling stake is worth $4.9 billion based on the closing price of Korea Exchange Bank shares, which rose 7.3 percent to 13,950 won in Seoul on Monday.