Bloomberg News

Hana Continues Talks With Lone Star on Korea Exchange Deal

June 17, 2011

(Adds shares plunged in first, third paragraphs.)

June 18 (Bloomberg) -- Hana Financial Group Inc. remains in talks to acquire Korea Exchange Bank for 4.7 trillion won ($4.3 billion), after its stock plunged to a seven-month low yesterday on speculation the deal will fall through.

Hana, South Korea’s fourth-biggest financial company, is continuing negotiations to renew a contract with Lone Star Funds initially signed in November, the Seoul-based bank said in an e- mailed statement. Talks will continue even with the U.S. fund mired in a court case over Korea Exchange, Hana said.

Shares of Hana slid 4.9 percent in Seoul trading yesterday to 35,300 won, their lowest close since Nov. 22, on speculation Lone Star’s prolonged legal disputes may jeopardize Hana’s bid for Korea Exchange Bank.

The Seoul High Court on June 16 opened a retrial for Lone Star’s former local head Paul Yoo, the firm and Korea Exchange Bank on stock price manipulation charges after the nation’s top court in March overturned a 2008 acquittal.

South Korea’s Financial Services Commission is delaying approval of Hana’s planned purchase of a 51 percent stake in Korea Exchange from Dallas-based Lone Star until legal disputes involving the buyout fund are cleared, the commission’s vice chairman, Shin Je Yoon, said on May 12.

Korea Exchange Bank’s attorney told the presiding judge on June 16 that it may file a constitutional appeal if the bank is convicted as an employer of a manager who violated the law. Prosecutors said Lone Star is also responsible for the stock manipulation charges as an employer of Yoo.

The appeal process could take years, according to Hong Hun Pio, an analyst at KTB Investment & Securities Co.

--Editors: Jim McDonald, Paul Tighe

To contact the reporter on this story: Seonjin Cha in Seoul at scha2@bloomberg.net

To contact the editor responsible for this story: Paul Tighe at ptighe@bloomberg.net


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