Lone Star eyes second lucrative Asian exit

Dallas-based private equity firm Lone Star is making waves in Asia on talk of making yet another profitable exit following the sale of its controlling stake in Korea Exchange Bank.

Poised to net over $3 billion (€2.5 billion) from the sale of a controlling stake in Korea Exchange Bank, US private equity firm Lone Star is reportedly attracting interest for its majority stake in Tokyo Star Bank from Japanese securities firm Nikko Cordial.

Citigroup, with an 11.1 percent stake, is the single largest shareholder in Nikko, Japan’s third largest brokerage firm.

According to reports in the Asian media, Nikko said it has not yet arrived at a decision on buying a majority stake in Tokyo Star, while Tokyo Star announced that it has not received an acquisition proposal. Both parties issued statements after Japan’s Nihon Zeizai Shimbun reported last week that Nikko planned to buy a majority stake of between 30 to 50 percent in Tokyo Star in a transaction valued at more than ¥140 billion ($1.2 billion, €1 billion).

Lone Star was also mentioned in the report as looking to sell its stake, presently just below 70 percent.

Lone Star bought near-bankrupt Tokyo Sowa in 2001 for ¥40.4 billion, renamed it Tokyo Star and carried out a turnaround strategy before making a partial exit in October last year when it sold 30.2 percent stake for ¥85.4 billion via an IPO. The sale represented a sevenfold return on Lone Star’s initial investment.

If the latest deal comes to fruition, Nikko will be the first Japanese securities brokerage to buy a controlling stake in a bank.

Lone Star is expected to reap well above $3 billion in profits from the sale of its controlling stake and the exercising of a call option to buy and sell two minority shareholders’ stakes in Korea Exchange Bank to Korea’s Kookmin Bank (KB). The transaction is valued at around $6.59 billion.

KB beat off competition from Korea’s Hana Bank and Singapore’s DBS to gain the controlling stake in Korea Exchange Bank with a 15,400 won per share bid. KB will acquire a stake of at least 64.64 percent, a Korea Exchange Bank spokesperson told PEO.