Fight for KEB stake could escalate with KDB bid

State-run Korea Development Bank Financial Group yesterday expressed its interest in acquiring Korea Exchange Bank, possibly joining a sudden heated competition for the country’s fifth-biggest bank by assets.

Lone Star Funds, the U.S. private equity fund, is selling its controlling 51 percent stake in KEB, with Hana Financial Group making an approach this week following that of Australia’s ANZ Bank.

KDB “will conduct a comprehensive review on the takeover of KEB and then we will make a proposal on the matter to the government,” said Min Euoo-sung, the KDB chairman.

He said KDB’s move would partly depend on the status of negotiations that Lone Star is conducting with Hana and ANZ.

The stake being sold by Lone Star, which acquired KEB in 2002 and has been trying to sell it since 2005, is valued at $3.8 billion based on current market prices.

Min said the acquisition of KEB would help his bank expand into overseas markets since KEB has a strong foreign network. “KDB, which will soon be privatized, should be given an opportunity [to acquire KEB] if it conforms to the national interest.”

KDB has traditionally served as the main policy lender for the Korean government, but wants to increase its deposit base as it undergoes privatization.

KDB has shown strong interest in taking over KEB for some time, according to industry sources.

But KDB had been reluctant to make a move because of the controversy over the sale of KEB by Lone Star, which has been criticized by local nationalist critics since the U.S. private equity firm potentially stands to make a huge profit on the deal, with some estimating that Lone Star could walk away with more than $4.4 billion.

The sudden announcement by Hana Financial Group on Tuesday that it was interested in KEB was seen as pushing KDB to make its bid public.

The possible three-way competition for the KEB stake is likely to push the bid price higher. “It [a hike in the deal price] is certainly possible,” said Yoo Sang-ho, a banking analyst at Korea Investment & Securities.

Kim Dong-soo, chairman of the Export-Import Bank of Korea, told reporters that he will make a decision on whether to sell the bank’s 6.25 percent in KEB after conducting a thorough review, including the outlook on KEB’s share price.

By Jung Jae-yoon [jyj222@joongang.co.kr]