Bloomberg News

Hana May Seek to Lower Price for KEB Takeover From Lone Star

July 03, 2011

(Updates with Lone Star’s comments in fourth paragraph.)

July 3 (Bloomberg) -- Hana Financial Group Inc. may seek a lower price for its acquisition of Korea Exchange Bank from Lone Star Funds after the takeover target decided last week to make a record dividend payment to the U.S. fund.

Korea Exchange Bank’s plan to pay 973.8 billion won ($912 million) in interim dividends “reduces the company’s value,” Lee Jung Dae, a spokesman for Seoul-based Hana Financial, said today by telephone. The price may be adjusted as Hana negotiates with Lone Star on extending the 4.7 trillion won agreement struck seven months ago, he said.

Korea Exchange shares have slumped 23 percent since the deal’s announcement on Nov. 25 amid Korean regulators’ reluctance to approve the transaction while Lone Star remains mired in a legal dispute. Seoul-based KEB’s board on July 1 approved the record dividend payment, helping Lone Star recoup all of the 2.15 trillion won investment it paid for the 51 percent stake in the bank in 2003.

Dallas-based Lone Star, which has recouped 2.1 trillion won on an after-tax basis, will receive about 497 billion won in the latest dividend payment. Jed Repko, a spokesman for Lone Star, declined to comment in an e-mailed response to inquiries after Seoul-based Edaily reported Hana’s plan earlier today.

Hana Financial, South Korea’s fourth-biggest financial company, and Lone Star planned to complete the deal by May 24. Hana remains in talks with Lone Star over an extension, Lee said today.

The Seoul High Court on June 16 opened a retrial of Lone Star, its former local head Paul Yoo and Korea Exchange Bank on stock price manipulation charges after the nation’s top court in March overturned a 2008 acquittal. Prosecutors are accusing them of intentionally driving down the share price of the bank’s credit card unit to buy it cheaply.

--Editors: James Gunsalus, Jim McDonald

To contact the reporter on this story: Bomi Lim in Seoul at blim30@bloomberg.net

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


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