By Kim Yon-se
Staff Reporter


HSBC is poised to take over Korea Exchange Bank (KEB), which is controlled by the Texas-based Lone Star Funds, according to sources.

An HSBC executive said the British-based banking giant is in talks with Lone Star Funds to buy KEB and plans to sign a memorandum of understanding soon.

``There will be an announcement on the merger talks soon,’’ he told The Korea Times. He also said the British bank will hold a press conference in Seoul next month to unveil its business strategies.

The official takeover will likely be conducted in November as the lockup period on the shares held by Lone Star in KEB will be lifted on Oct. 31 under contracts made with the Korean government in October 2003.

Sources said the bidding price will be set at about $6-6.5 billion (6-7 trillion won) for a 79 percent stake held by three major shareholders, including Lone Star.

Lone Star, the majority shareholder, holds a 50.5 percent in KEB. Commerzbank holds 14.6 percent and the Export-Import Bank of Korea holds 13.9 percent.

Under the ``drag along right,’’ the U.S. equity fund is allowed to ask the other two major shareholders to sell their stakes simultaneously or sell just a 50.5 percent stake.

The two sides are in low-key negotiations as to whether or not to trade the total shares of the three shareholders, according to sources, including the HSBC executive.

The final result is up to the potential investor. If the bank wants absolute management rights, it will buy the 79 percent stake. Given KEB’s all-time high stock price, hovering at 12,000 won per share, it could only focus on the stake held by Lone Star.

Even the takeover of a 50.5 percent stake will cost more than $3.7 billion (4 trillion won).

An official of the Financial Supervisory Commission (FSC) said he believes that the two other shareholders will also want to sell their entire stakes.

HSBC plans to submit an application to the FSC, Korea’s top financial regulator, to acquire KEB when the lockup period ends.

``I don’t know if Lone Star is in sale talks with an investor,’’ the FSC official said. ``But it is certain that a designated investor will submit an application for eligibility after reaching a tentative agreement with Lone Star.’’

Lone Star declined to comment on the merger deal. It continued to say that nothing has been decided yet.

KEB denied the talks between the two sides, saying that the bidding is likely to start after the lifting of the lockup period.

HSBC has recently appointed a new public relations executive director and recruited financial experts from commercial banks. It is also conducting large-scale hiring of rookies and bankers from a variety of backgrounds.

kys@koreatimes.co.kr