The 51 percent holdings in Korea Exchange Bank held by Lone Star Funds will stay under Korean ownership.This is according to current reports indicating that Australia and New Zealand Banking Group (ANZ) has lost the bid for Korea Exchange Bank and will make public its position on the asset after Seller Lone Star and Korea's Hana Financial Group finalises a deal.
According to a November 10 Reuters article, ANZ had offered up to $4.6 billion for Lone Star’s stake in KEB after several weeks of conducting due diligence. The Australian bank, had up until yesterday, been reported as making assurances in Australian media that it was still in the running to buy the Korean Bank. However, news now indicate that ANZ has fallen out of the running after being unable to match Hana’s current offer of up to 4.8 trillion won (€3.06 billion; $4.1 billion).
Hana Financial declined to comment and Lone Star could not be reached for comment, however Hana president Kim Jong Yeol confirmed to Bloomberg that the parties were still in negotiations over price, and that a deal was expected to be struck in two to three months.
This is Hana’s second offer for KEB in four years. The bank first attempted to acquire KEB in April 2006 in a fruitless bidding war against Singapore’s DBS Group Holdings and fellow Korean bank, Kookmin Bank. The deal was valued then at around $3 billion. Lone Star’s acquired its stake in South Korea’s fifth-biggest bank for $1.38 billion in October 2003. The firm has attempted to exit its stake in KEB several times over the past four years with no success. Lone Star’s stake is worth 4.06 trillion
won today, Bloomberg noted.
Hana is also reportedly seeking private equity funding for the purchase, most notably from Kohlberg Kravis Roberts and The Carlyle Group. According to Korea’s Yonhap news service, if the bank had won the bid in its first attempt to invest in KEB in 2005, four domestic pension funds led by Korea’s National Pension Service would have formed a private equity fund to invest a combined $2.1 billion in Hana to help fund the purchase.
A complete divestment would mark the closing of a seven-year long saga for Lone Star, which has been marred by controversy. In 2003, Lone Star was accused by the South Korean government of colluding with KEB management to exaggerate the bank’s financial distress at the time of its purchase, allegedly allowing Lone Star to acquire its stake in the Korean bank at significant discount.