HSBC Says In Talk To Buy S Korea's KEB

Source : The Business Times, August 20, 2007

SEOUL/HONG KONG - HSBC Holdings Plc said on Monday it was in talks to buy a majority stake in Korea Exchange Bank (KEB), valued at US$4.5 billion and held by Lone Star, sending shares of Korea's fifth-largest lender higher.

The sale process has dragged on amid a protracted legal dispute between Dallas-based private equity fund Lone Star, which holds 51 per cent of KEB, and South Korean authorities.

The legal disputes forced Lone Star to cancel a US$7.3 billion deal last year to sell KEB to Kookmin Bank, South Korea's top lender.

Singapore's DBS had held talks with Lone Star for a possible purchase but ended negotiations, hinting at legal issues.

KEB and Lone Star declined to comment.

Foreign banks keen to enter the Korea may find that acquisitions might be the only option left to them, given the South Korean government's reluctance to allow new entrants into the crowded banking sector.

Citigroup and Standard Chartered became major players through acquisitions of domestic rivals, which HSBC had also attempted to buy.

South Korean prosecutors say a former government official colluded with a lawyer hired by Lone Star and KEB's chief executive to inflate KEB's losses, allowing Lone Star to buy it for around US$900 million less than it was worth.

An official of the regulatory Financial Supervisory Commission told Reuters it would wait for a final court ruling before giving the nod to any possible KEB sale. -- REUTERS