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Financial uncertainty, lower share price are sizable obstacles
November 25, 2008
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| A Seoul court yesterday said Lone Star’s 2003 purchase of Korea Exchange Bank from the government was legal. The ruling ends the legal uncertainty surrounding Lone Star’s KEB ownership, which has impeded the U.S. buyout firm from reselling Korea’s sixth-largest bank over the past three years. A broken deal with HSBC can be counted among its several failed attempts. Still, Lone Star may face difficulty finding a new owner for KEB for the time being, according to local banking industry analysts. KEB’s significantly lowered value is one stumbling block, they said. The company’s stock price this year has been bombarded by the ever-expanding global financial crisis. Yesterday, shares in KEB inched down by 0.5 percent to close at 5,500 won ($3.64), down 61.8 percent from 14,400 won on Sept. 9. The price at which Lone Star had agreed to sell KEB to HSBC was 17,725 won. Lone Star has a 51.02 percent stake in KEB. “With legal uncertainties settled, we can ask whether the possibility of Lone Star selling Korea Exchange Bank has gone up,” said Hong Jin-pyo, a senior analyst at Goodmorning Shinhan Securities. “I don’t think so.” Hong said economic uncertainty also blocks the sale. “It won’t be easy for both the seller and a possible buyer to reach to a price they both are satisfied with,” Hong said. Severe capital demand at banks is also lowering the number of interested companies. Kookmin Bank, for instance, was considered to have strong interest in buying KEB, but its recent transformation into a holding company has lowered its fiscal ammunition to do so. Kookmin Bank was a preferred bidder for KEB sale in 2006, but the deal collapsed because of local financial authorities’ reluctance to approve it, due to legal uncertainty. Some market watchers say Lone Star could hold the Korean government responsible for the loss it took due to the protracted period it has taken to sell KEB. Lone Star informed the government in a letter sent in July of its willingness to seek such losses if the deal were further delayed. Market watchers say Lone Star can take the government to the international court, but the chances are low as it fears that the friction with the government will further disrupt the sale of KEB. By Moon Gwang-lip Staff Reporter [joe@joongang.co.kr] |
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