Private Equity News & Analysis

Lone Star signs KEB deal with HSBC(3)

HSBC has pressed ahead with the acquisition of the Korean Exchange Bank from Lone Star despite a lack of clarity from the country’s authorities on the deal’s status.

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US buyout firm Lone Star will sell its 51 percent stake in Korea Exchange Bank to HSBC for $6.3 billion, providing it receives clearance from the country’s authorities.

The deal has come under scrutiny by the Korean authorities due to issues related to the buyout firm’s acquisition of the bank in 2003. Only last week, Kim Dae-pyung, deputy governor of the Financial Supervisory Service, Korea’s main financial watchdog, said the government would not approve any sale of the KEB stake until the courts had ruled on the legality of Lone Star’s original deal, according to media reports.

Lone Star’s offices were raided last month by the country’s authorities.

The buyout firm’s attempt to sell the bank to Kookmin last year was unsuccessful in the face of public and political opposition.

Due to worries the acquisition may be delayed, if the company is bought after 31 January 2008, HSBC will pay a further $133 million. If the deal has not received regulatory approval by 31 April 2008, the bank may withdraw its bid.

On 30 June 2007 KEB’s total assets were KRW 73.5 trillion ($78.2 billion, €53 billion) with shareholders’ equity of KRW6.3 trillion. Last year, KEB had pre-tax profits of KRW1.5 trillion.