At long last, SeoulBank is being sold. They must be celebrating in the ministries in the South Korean capital, and not just for getting the previously nationalized institution off the government's books. I'd reckon the mandarins of Seoul are also pretty pleased to have kept the bank in domestic hands, whether they wish to say so or not.
Three weeks and some of intense competition are now concluded. The winner, Hana Bank, will become South Korea's No. 3 institution after Kookmin Bank and government-owned Woori Bank.
The loser in this was Lone Star Funds, an American private equity fund based in Texas that has acquired masses of South Korean debt over the years since the Asian financial crisis, but never an institution. The offers submitted at the end of July and subsequently modified were considerably different but close in value. Hana Bank's winning bid is composed of a share swap worth 1.1 trillion won (US$922 billion) for roughly 70 percent of SeoulBank's shares.
Stockholders in Hana will get 2.1 SeoulBank shares for each Hana share. Lone Star, by contrast, offered 900 billion won in cash for the entire institution and up to 350 billion won to derive from future profits.
Lone Star could argue that its offer was the better of the two. It hasn't. Byeon Yang Ho, a director-general at the Finance Ministry, was swift to note that the government was in doubt as to whether, under Lone Star, the bank would generate enough profits to make the deal as good as it sounded. "It would be highly unlikely we'd get the upper end of the 350 billion won in shared profits," Byeon said.
Come, come. Byeon may be correct, but let's acknowledge that the tilt in this transaction was toward the domestic buyer. Could Seoul sell another financial institution to foreign investors without prompting a political backlash? That was one question. Did Seoul want to give foreign investors another bank? That was another.
SeoulBank, you will recall, was among the first South Korean lenders to go under when the Asian financial crisis made its way northward from Thailand in early 1998. The government injected almost US$5 billion into the institution, and unloading it was part of that eventually regrettable deal Seoul cut with the IMF in exchange for a rescue package.
Korea First Bank, you will also recall, was the other sale stipulated in the IMF papers, and KFB made history in 1999, when the government sold a 51 percent stake to Newbridge Capital Ltd, another US equity fund. It has not proven to be a felicitous deal for South Korea.
Newbridge wrung an agreement out of the South Koreans to cover any unanticipated debts discovered in the bank's books, a clause that has so far cost Seoul several hundred million dollars. In its haste to shift away from financing heavy industry to consumer products and branch banking, KFB also refused to participate in plans to keep Hynix Semiconductor Inc hobbling on.
Since then, finance ministry officials have made their preferences plain. The government will hold onto its 49 percent of KFB until it finds a buyer it considers more "responsible," as one bureaucrat put it not long ago in an interesting choice of words.
Indeed, there was talk in Seoul earlier this year that SeoulBank and the government's half of KFB might simply be folded into the Woori group. So you could kind of see this deal coming.
RSS