The head of Korea Development Bank (KDB) said yesterday that the state-owned lender is in talks to acquire troubled US investment bank Lehman Brothers.
KDB Governor Min Euoo-sung said that discussions were under way “to form a consortium with private banks as [we] believe it is more desirable to acquire Lehman Brothers jointly rather than alone.”
“It is difficult to say how the talks will progress in the future as we have not been able to narrow differences with the Lehman side over prices,” he said in Korean-language comments to reporters, according to the bank’s public relations office.
It was unclear how much of a stake in Lehman the banks were seeking to obtain in the negotiations.
A regional spokesperson for Lehman Brothers in Hong Kong could not immediately be reached for comment.
Min was CEO of Lehman Brothers’ South Korean operations until taking the helm of KDB earlier this year.
The reported comments came after Britain’s Sunday Telegraph newspaper reported over the weekend on its Web site that Lehman hoped to conclude a deal this week with KDB, which would inject as much as US$6 billion in capital in return for what the paper called a stake of up to 25 percent in the investment bank.
ALTERNATIVES
The report, which cited no sources for those details, also said that Lehman was working on alternatives to KDB, including China’s CITIC Securities (中信證券) or sovereign wealth funds from Abu Dhabi and Qatar.
Speculation has been rampant in recent weeks that Lehman Brothers Holdings Inc, the fourth-largest US investment bank, could try and reach a deal for a capital injection.
Analysts project that Lehman, considered to be the most vulnerable to the credit crisis, could post losses of up to US$4 billion when it reports third-quarter results later this month. It is expected that the investment bank will also announce a deal to raise fresh capital to help offset the losses.
Media reports in recent weeks have listed KDB, which the government plans to privatize, among the top overseas candidates to invest in Lehman.
At the end of last year, KDB had total assets of 122.62 trillion won (US$108 billion).
QUESTION
Jun Kwang-woo, chairman of South Korea’s Financial Services Commission (FSC), in comments last month questioned whether a state-run institution should take the lead role in such an acquisition.
“Generally speaking, the private sector should be the leader in such a deal,” he told reporters on Aug. 25.
Jun’s comments had caused speculation that the government was trying to warn KDB away from pursuing a deal for Lehman Brothers.
Min said yesterday that differences in viewpoint between his bank and the FSC, the government’s financial regulator, have narrowed.
Korea Development Bank was founded in 1954 to help spur South Korea’s industrial development as the country was embarking on recovery from the 1950-1953 Korean War.
In January, Merrill Lynch & Co. received a US$6.6 billion cash injection to strengthen its balance sheet from three foreign institutions, including Korea Investment Corp, a South Korean government-owned investment management company launched in 2005.
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