Shareholders agree to Hana’s takeover of KEB

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Shareholders agree to Hana’s takeover of KEB

Korea Exchange Bank, which began as a state-owned financial entity with a significant role in Korean financial and industrial history, will be totally privately owned by its majority shareholder Hana Financial Group.

At a meeting yesterday more than 98 percent of Hana Financial Group shareholders accepted a proposal to swap the remaining 40 percent stake in KEB for Hana’s shares.

In a separate shareholders meeting, 67.8 percent of KEB shareholders agreed to the swap proposal although the Bank of Korea, which is the second-largest stakeholder of the nation’s fifth-largest bank, opposed the deal.

A KEB shareholder will be able to exchange 5.28 shares for a single Hana Financial Group share.

After a struggle in late 2011, Hana was able to buy a 51 percent stake that was held by U.S. private equity fund Lone Star for 4.69 trillion won ($4.23 billion) in early 2012.

The financial group increased its stakes in KEB to 60 percent through additional share purchases including 6.25 percent owned by the Export-Import Bank of Korea.

While Hana Financial Group’s shares dipped yesterday 0.89 percent from the previous day’s trade to close at 39,000 won, shares of KEB were down 1.08 percent to close at 7,310 won.

With yesterday’s decision, KEB stock will be no longer traded in the market starting April 3 and it will be delisted from the Seoul bourse as of April 26.

Following Hana Financial Group shareholders’ decision, the BOK must offload all of its 39.5 million shares in the bank. In 1967, when KEB was founded, the central bank invested 10 billion won. Today it owns a 6.1 percent stake in the bank.

By law the central bank cannot own shares of profit-seeking companies.

“When KEB was privatized in 1989, the law allowed an exception for the central bank to continue to own stock in the bank,” said a BOK official. “However, we have come to the conclusion that it would be a violation of the law to own stock in Hana.”

The central bank estimated that the sale of its stake would likely incur a loss of 103.4 billion won considering that the BOK will receive 291.6 billion won while its initial cost was 395 billion won. The BOK will receive 7,383 won for each share that it has in the bank.

However, when including the 306.1 billion won it received as dividends over the years, it will have made a profit of 202.7 billion won.

“We may suffer a lost of 100 billion won on the books but we are confident that it is an amount that we can endure,” the official said.

Meanwhile KEB’s labor union has been strongly opposing to the stock swap. A large group of union workers showed up at the KEB shareholders meeting to protest the swap. They claimed that such a move goes against the earlier promise made by Hana Financial Group to guarantee at least five years of independence for the bank.

Hana Financial Group Chairman Kim Jung-tae said he would take time to talk with the employees including the KEB labor union.

“The agreement of the five-year independent management must be respected,” Kim said yesterday through a statement.

“Today’s decision will not only solve future uncertainties, it will be an opportunity to raise the financial group’s value as a whole,” the chairman added.

By Lee Ho-jeong []
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