HSBC agrees deal for Korean bank stake
Banking giant HSBC moved to step up its presence in fast-growing emerging markets today as it agreed to buy a majority stake in Korea’s sixth largest bank.
HSBC has offered to buy a 51% stake in Korea Exchange Bank (KEB) from US private equity group Lone Star for $6.3bn (€4.6bn).
But the deal faces substantial regulatory hurdles, with ongoing court cases surrounding Lone Star’s original acquisition of KEB in 2003.
The sale is dependant on a host of conditions being met by next April, including all government and regulatory approvals.
South Korea’s top financial regulator said it will not approve the sale of KEB until a court rules whether Lone Star’s purchase of the bank was legal, according to reports.
Lone Star paid $1.2bn (€88m) for the stake in 2003, when the bank was struggling and on the edge of bankruptcy.
It has since put significant investment into the group, helping grow the bank into the sixth largest in the country.
Lone Star tried to sell its stake in KEB last year in a deal which would have seen it walk away with billions of dollars of profits.
The news sparked outrage in Korea, which led to an investigation into the terms of the original deal.
It is understood the legal proceedings, which reportedly involve a former Korean government official, a former KEB executive and Lone Star, could delay the purchase of the stake by up to a year.
HSBC has agreed to pay an extra $133m (€97.6m) if the takeover is not completed by January 31.
KEB has some 350 branches in 18 countries making it Korea’s largest international bank. HSBC said it would retain the bank’s name when the deal goes ahead.
HSBC chairman Stephen Green said the acquisition reflected the group’s strategy to expand its presence in “important growth economies” particularly in Asia, Latin America and the Middle East.
He added the deal “would provide HSBC with a significant presence in Asia’s third largest economy and reinforce our position as Asia’s number one international bank”.
