Seoul court puts brakes on Hana-KEB mergerThe ambitious plan for an early merger with Korea Exchange Bank that Hana Financial Group has been pushing since last summer hit a major road bump Wednesday in Seoul Central District Court.
The court approved an injunction sought by KEB’s labor union against proceeding with the early merger.
The court ruled that Hana Financial Group cannot seek approval of the merger from the Financial Services Commission (FSC) or the group’s shareholders until after June 30.
The group had planned to proceed on March 1.
The court acknowledged Hana’s claim that the early merger would improve the performance of the two banks. However, it dismissed claims by management that KEB would face a critical situation if an immediate merger does not take place.
Although the court acknowledged that a merger is the management’s right, it said it is difficult to conclude that the labor union is impeding that right by adhering to a grace period that was agreed upon by both sides.
The court said the agreement has binding power, as the agreement was made in an in-depth discussion between the two parties mediated by the FSC.
When purchasing the majority stake of KEB from the U.S. private equity fund Lone Star Funds in 2012, Hana Financial Group guaranteed the independent management of KEB until 2017.
Since July, however, the banking group has tried to push up the date of the merger in hopes of improving its competitiveness in the local banking industry, especially at a time when financial companies are struggling under the country’s loose monetary policy. Even on Tuesday, in an event celebrating the launch of the newly merged operation of Hana Bank and KEB in Beijing, group Chairman Kim Jung-tai stressed the synergy and positive contribution the merger would bring.
Hana Bank and KEB management signed an agreement in October to work toward the merger of the two banks.
However, the labor union submitted the injunction against the merger last month citing a violation of the agreement made three years ago.
BY LEE HO-JEONG [firstname.lastname@example.org]
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