Bloomberg News

Hana Yet to Agree on Extension With Lone Star for KEB Deal

June 07, 2011

(Updates with closing share price in fifth paragraph.)

June 7 (Bloomberg) -- Hana Financial Group Inc. said it hasn’t reached agreement with Lone Star Funds to delay the planned takeover of Korea Exchange Bank, a deal that’s been put on hold because of South Korean regulatory hurdles.

Hana and the Dallas-based U.S. buyout fund haven’t finished negotiations on whether they will set a new deadline to complete the 4.7 trillion won ($4.35 billion) acquisition, Lee Jung Dae, a spokesman for Hana, said by telephone yesterday, without elaborating. The companies, which agreed in November to close the transaction by May 24, may announce an extension as early as today, the Maeil Business Newspaper reported yesterday.

The Financial Services Commission said last month it will delay approving the sale until legal issues involving Lone Star are cleared, hindering Hana Chairman Kim Seung Yu’s bid to narrow the gap with bigger domestic rivals KB Financial Group Inc. and Woori Finance Holdings Co.

“The deal extension would be the best defense Hana can make to avoid a total collapse of the transaction,” said Hwang Seok Kyu, a banking analyst at Kyobo Securities Co. in Seoul. “Still, a lot of uncertainty still lingers over whether Hana can complete the deal and when the authorities will finally make an approval decision.”

Hana shares rose 0.9 percent to 39,150 won at the 3 p.m. close in Seoul trading, compared with the Kospi index’s 0.7 percent drop. The stock has fallen 12 percent since the regulator’s May 12 announcement.

Reduced Stake Purchase

The agreement may include an initial purchase of as much as 5 percent of Korea Exchange Bank by Hana from Lone Star’s 51 percent stake to ensure the deal will go through, the Maeil said. Under the new contract, both sides may be able to extend the purchase agreement every six months, the newspaper said.

Phone calls to Lone Star seeking comment went unanswered outside business hours.

South Korea’s Supreme Court in March overturned a 2008 ruling that cleared Lone Star and its former local chief Paul Yoo of stock price-manipulation charges. The court on March 10 ordered the Seoul High Court to reconsider whether Yoo, Korea Exchange Bank and Lone Star’s local unit broke trading rules or evaded taxes.

The regulator’s vice chairman, Shin Je Yoon, said on May 12 it will await the outcome of the judicial process to decide whether Lone Star is the legitimate owner of the Korea Exchange stake.

--Editors: James Gunsalus, Linus Chua

To contact the reporters on this story: Seonjin Cha in Seoul at scha2@bloomberg.net; Shinhye Kang at skang24@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net.


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