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Prosecution says it will appeal Yoo verdict as nationalistic sentiment bubbles
June 25, 2008
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And whoever buys Korea’s sixth largest bank, it will unlikely be HSBC, a global banking giant based in Europe, analysts here say. The analysis came out after a Seoul appeals court yesterday cleared Paul Yoo, the former head of Lone Star’s Seoul branch, of manipulating stock prices of Korea Exchange’s credit card unit, which prosecutors claimed was done to acquire it cheaply. The prosecution said it will appeal to the Supreme Court. The Financial Services Commission, the top financial regulator of Korea, said, yesterday it will delay a decision on approval of a pending deal between Lone Star and HSBC to trade a controlling stake in KEB.
“In this situation, it is not proper for the FSC to proceed with its regulatory process related to the KEB sale.” A high-ranking official of the FSC, speaking on condition of anonymity, said the FSC must be prudent in the Lone Star matter considering the nationalist public sentiment stirred by resumption of U.S. beef imports. Opponents of the beef imports claim the Korean government yielded too much to the U.S. in reopening the Korean market to American beef. The bid to sell KEB by Lone Star has also been a source of nationalistic anger as some Koreans believe the foreign firm was making undue profits. In a separate legal case, former government officials have been suspected of artificially lowering the stock price of KEB to help Lone Star purchase KEB at cheaper prices in 2003. Lone Star claimed there is strong anti-foreign business sentiment among the Korean public. “Any decision will be made only after the court makes a ruling on the case, not to speak of the stock manipulation case,” the official said. Many analysts say the deal between Lone Star and HSBC, with a 51 percent stake in KEB on the table for $6.3 billion, was almost doomed to fail. The deal, made at the end of last year, is scheduled to take effect on July 31, without further extension. The self-imposed deadline for getting approval was initially set to expire on April 30, but was extended by three months. “In this situation, it might be hard for us to hang on to the deal,” said an HSBC official who wished to remain nameless. If the deal breaks down, it might be a boon for Lone Star, analysts say. Local banks such as Kookmin Bank and Hana Bank are showing interest in taking over KEB, making it possible for Lone Star to raise the price. Lone Star has already recouped 85.4 percent of its 2.15-trillion-won investment in KEB. Analysts say the drawn-out deal process is not good for KEB, as it is distracting the bank from its business. “The protracted deal is impeding our bank from investment,” said a KEB official, requesting not to be named. By Kim Jun-hyun JoongAng Ilbo [joe@joongang.co.kr] |
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