Hana urges FSC to push KEB sale while still time

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Hana urges FSC to push KEB sale while still time

Hana Financial Group’s deal with U.S. buyout fund Lone Star to acquire Korea Exchange Bank (KEB) could be over if financial regulators do not approve it by the end of February, Hana Financial Group Chairman Kim Seung-yu said yesterday.

Kim’s remarks suggest that Lone Star is unlikely to renew the contract should the deal fall though again by failing to win government approval on Feb. 29, when the banking group’s renegotiated contract with the buyout fund expires.

Financial regulators have maintained that the issue of Lone Star’s eligibility to own a bank under local banking laws must be confirmed prior to regulators’ approval of Hana Financial Group’s incorporation of KEB as a subsidiary. With government officials denying plans to rule on Lone Star’s eligibility until after the Lunar New Year holidays later this month, however, KEB may run out of time in its quest to find a new owner.

At a gathering of heads of Korea’s major financial institutions held at Lotte Hotel yesterday, Hana Financial Group Chairman Kim Seung-yu said that any foot-dragging by financial regulators could result in the deal being terminated.

“If financial authorities fail to approve [Hana Financial Group’s] bid to acquire KEB by the end of February, the deal with Lone Star is likely to break down,” Kim said.

He suggested that after February, Lone Star would be reluctant to continue the process of seeking governmental approval. “Do you think Lone Star will renew the contract after next month?” Kim asked rhetorically in reply to a reporter’s query. He also suggested the possibility of Lone Star pursuing a lawsuit against financial authorities should they fail to grant approval.

The deal between Hana Financial Group and Lone Star has been renewed twice since it was first struck in November of 2010 due to delayed government approval.

The Financial Services Commission (FSC) said recently that the controversial question of whether Lone Star is a “nonfinancial investor” must be settled before it can give the go-ahead to Hana Financial’s acquisition of KEB.

Nonfinancial investors with more than 2 trillion won in industrial assets are not eligible to own a majority stake in a bank under Korean law.

Because the FSC’s high-level meetings are held twice a month, there are theoretically four chances for the government to approve the KEB deal before the February deadline.

“There are no plans to discuss the issue of Lone Star’s eligibility at the Jan. 11 meeting,” said an FSC staff.

By Lee Jung-yoon [joyce@joongang.co.kr]

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