Lone Star Funds, the US-based buyout firm whose multibillion-dollar sale of its investment in Korea Exchange Bank was blocked by South Korean prosecutors, will recoup almost a third of its original investment in a move that drew divided reaction.
Korea Exchange Bank officials said on Friday that it would pay a US$445 million dividend, its first in a decade, despite a 48 percent plunge in its net profit last year.
The bank said it was giving out US$688 million to its shareholders, or 1,000 won a share. Lone Star, based in Dallas, controls 64.6 percent of the bank, one of the largest lenders in South Korea. It paid 1.4 trillion won (US$1.5 billion) for the majority stake in 2003.
The move raised hackles among South Korean activists, who have accused Lone Star and other foreign equity funds of acting like vultures.
"Recouping part of its investment now is not an appropriate attitude we can expect from a fund on trial for that investment," said Chung Jong-nam, secretary-general of Spec Watch Korea, a civic group that has filed a lawsuit in an attempt to annul Lone Star's 2003 transaction. "I don't think it will do any good for Lone Star's image here."
An investigation by South Korean prosecutors into the original purchase pushed Lone Star to scrap a US$7.3 billion deal to sell the bank to Kookmin Bank of South Korea. Many analysts then predicted that the fund might try to cash out through large dividend payments.
In December, South Korean prosecutors said that the fund's original purchase was illegal. The Seoul Central District Court, which is hearing the case, is seeking to extradite Lone Star executives for questioning.
Lone Star has denied any wrongdoing, protesting what it called a politically motivated investigation by prosecutors who it said were capitalizing on widespread public sentiment against foreign investors.
"Today's dividend payment was smaller than expected," said Lee Jun-jae, a banking industry analyst at Korea Investment & Securities.
Some analysts had predicted a dividend of 2,000 won per share, rather than the 1,000 won a share that was announced.
"Lone Star must have tried to strike a balance between the options of making a quick exit through high dividends or holding them down for the future for a higher sale price of Korea Exchange," said Choi Min-jai, a senior fund manager at KTB Asset Management.
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