Hana to Pay as Much as $4.2 Billion for Lone Star's Korea Exchange Stake

Hana Financial Group Inc. will sign a contract tomorrow to buy a controlling stake in Korea Exchange Bank from Lone Star Funds for as much as 4.75 trillion won ($4.2 billion), a deal that would be the biggest acquisition for Hana.

“Price negotiation is over now and we’ll sign the contract tomorrow,” Kim Seung Yu, chairman and chief executive officer of Hana, said in a phone interview today before traveling to London to meet Lone Star’s founder John Grayken. Funding of the purchase will be a “no problem” for Hana, the chairman said.

The board of Hana today unanimously approved the purchase plan, Kim said. The company will spend 4.65 trillion won to 4.75 trillion won for the 51 percent stake in Korea Exchange Bank and will pay in cash, Hana said in a regulatory filing.

Hana, South Korea’s fourth-largest financial company, climbed to an almost 14-month high in Seoul trading on speculation it would beat Australia & New Zealand Banking Group Ltd. to the deal. Kim has been seeking an acquisition to challenge bigger local competitors, while Lone Star has been trying to sell Korea Exchange Bank for more than four years.

“Hana shares have been discounted because of weak marketing capacity and profitability compared with bigger rivals,” Shim Kyu Sun, a banking industry analyst at Hi Investment & Securities Co., wrote in a note to investors. “The KEB purchase will improve such weakness.”

Shim raised a six-month estimate for Hana’s shares to 53,000 won and kept a “buy” recommendation.

Shares Surge

Seoul-based Hana surged 7.3 percent to 39,700 won, the highest close since Oct. 1, 2009. Korea Exchange slipped 0.8 percent to 12,250 won. The benchmark Kospi Index lost 0.2 percent.

ANZ Bank won’t make a counter-bid for the stake in Korea Exchange Bank, said a person with knowledge of the matter who declined to be identified before a statement from the Melbourne based lender that may come tomorrow.

“We’ll make an announcement after Hana and Lone Star sign an agreement,” said Stephen Ries, a spokesman for ANZ Bank. He declined to comment further. ANZ had been studying KEB’s finances since at least August.

Hana acquired SeoulBank for 1.15 trillion won in stocks in 2002, its third bank acquisition following Chung Chung Bank and Boram Bank after the 1997-98 Asian financial crisis.

To contact the reporter on this story: Seonjin Cha in Seoul at scha2@bloomberg.net

To contact the editor responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net

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