Lone Star disposes of 13.6 percent stake in Korea Exchange Bank

Lone Star has sold a 13.6 percent stake in Korea Exchange Bank after a long-drawn investigation into the acquisition caused the sale of the firm’s entire interest in KEB to be abandoned. Separately, Lone Star sold Kukdong, a construction company.

Lone Star has sold 13.6 percent of its stake in Korea Exchange Bank through the capital market to a mix of international and Korean investors.

The shares were sold at KRW13,600 ($14.68), fetching Lone Star $1.3 billion, the company said in a statement.

John Grayken, chairman of Lone Star said: “The purpose of this sale was to paydown debt. Lone Star still owns 51 percent of KEB and will continue to hold this investment for sale to a strategic investor.”

The statement was made in wake of a breakdown in talks between Lone Star and Singapore’s DBS Holdings, a banking group that has been keen to acquire Korea Exchange Bank since last year.

Then, DBS was discouraged from pursuing the purchase because Korean authorities frowned on its shareholding structure – one of its key shareholders is Singapore government investment company, Temasek Holdings.

Earlier this month, DBS this month said it ended talks with Lone Star because of “uncertainties” which referred specifically to continuing probes into Lone Star’s purchase of the bank.

“We are actively looking for a strategic investor who can take KEB to the next level,” Grayken said.

Last year, Lone Star reached an agreement to sell its 64.6 percent interest in Korea Exchange Bank to rival Kookmin Bank in a transaction that would have netted it a profit of over $4 billion. The transaction was cancelled because of probes aimed at nullifying the deal’s validity.

In a separate transaction, Lone Star agreed to sell Kukdong Engineering & Construction to local strategic buyer, Woongjin Holdings.

The sale and purchase agreement entered into after a competitive process has been submitted for regulatory approval, Lone Star said in a statement.

Kukdong was under court supervision in 2003 when Lone Star bought the company. Since the acquisition, revenues at the firm which build roads, golf courses, housing complexes and industrial buildings has grown by over 20 percent a year, according to the same statement.

Grayken said: “We are proud that we were able to rescue Kukdong from a long bankruptcy process and help transform it into a very strong and successful company.”

He added: “The sale to Woongjin Holdings represents a normal step in the investment cycle of a private equity fund. As Kukdong has been turned around, it is now time for a more strategic owner to step in.”

ABN AMRO advised Lone Star on the Kukdong sale.