Home / World Business
Wed, Jun 27, 2007 - Page 10 News List

KEB sale will take time: S Korean watchdog

AFP , SEOUL

South Korea's financial watchdog said yesterday that a plan by US fund Lone Star to sell Korea Exchange Bank (KEB) will take "a considerable amount of time" to carry out as a result of legal uncertainties.

The remarks from a senior Financial Supervisory Commission official came after the Dallas-based private equity fund said it was in favor of an early sale of its controlling stake in South Korea's fifth-largest lender.

Director Kwon Hyouk-se told reporters that the commission would "thoroughly screen" the qualifications of any buyer who wishes to acquire the controlling stake of 51 percent from Lone Star.

He said that court cases concerning the legality of Lone Star's 2003 acquisition of the bank and the alleged manipulation of the stock price of its credit card service unit have not yet finished even lower court hearings.

"Therefore, it would take a considerable amount of time for Lone Star to sell KEB," Kwon said.

He made the remarks after Lone Star's chairman John Grayken said the fund was pushing for an early sale of KEB.

"My own preference is for an early sale and our lawyers advise me that there is no legal reason to wait," he said in an e-mail interview with Munhwa daily.

KEB, after being successfully rescued from failure, now needs a strategic investor to move to the next level and until that happens, KEB is somewhat restricted in setting its long-term vision, he said.

"Another issue is price. KEB is now a successful bank with a great and growing business. If the legal process goes to appeal and takes two or three years, the price of the bank may be double in which case there would be fewer banks in a position to buy," he said.

Lone Star last week sold 13.6 percent of KEB stocks worth US$1.3 billion to buyers including South Korea's Hana Financial Group and the National Agricultural Cooperative Federation.

It still owns 51 percent. Lone Star bought 50.5 percent of KEB for US$1.5 billion in 2003 and later increased its stake to 64.6 percent.

South Korean prosecutors last year brought charges against six people, including a former KEB president, accusing them of manipulating KEB's financial health status to pave the way for the private equity fund to acquire the bank.

Lone Star was also accused of manipulating the share price of KEB's separate credit card unit so it could be acquired cheaply by the bank.

Lone Star denies the allegations and says the charges were driven by a latent hostility toward foreign investors.

This story has been viewed 2056 times.
TOP top