South Korea’s financial regulator withheld a decision on whether Lone Star Funds is the legitimate owner of Korea Exchange Bank, fueling concern that a sale of the buyout firm’s stake to Hana Financial Group Inc. (086790) may be delayed.
The Financial Services Commission deferred its decision after the nation’s highest court last week ordered that Dallas- based Lone Star and its former local head be retried over allegations that they violated trading laws, Choi Jong Ku, standing commissioner at the regulator, told reporters today.
The regulator’s review of Hana Financial’s proposed 4.7 trillion won ($4.2 billion) takeover of Korea Exchange Bank is a separate legal issue, the Commission said today. Lone Star has tried for more than five years to sell its 51 percent holding as authorities examine the circumstances surrounding its 2003 investment in the lender.
“The officials seem to want to take their time, to build up their excuses for not making a decision,” said Hwang Seok Kyu, an analyst at Kyobo Securities Co. in Seoul. “Completing Hana’s acquisition may take longer than it wants, but I don’t think the deal will fall apart at this point.”
Three calls to Lone Star’s Dallas headquarters outside of U.S. business hours weren’t immediately answered today. Hana Financial Chairman Kim Seung Yu said he’s concerned about possible delays to the transaction, according to an e-mailed statement from the company today.
Both Hana Financial and Lone Star have the option to walk away from the deal unless it’s completed by May, the South Korean company said.
Kim agreed in November to buy the stake from Lone Star, the buyout fund controlled by John Grayken, in a deal that would be Seoul-based Hana’s largest takeover. Kim said in November that he wants to complete the purchase by March.
The regulator will try to complete a legal review of whether Lone Star is eligible to hold the stake as soon as possible, Choi said, without providing a specific timeframe.
South Korea’s Supreme Court last week overturned a 2008 ruling that cleared Lone Star and its former local chief, Paul Yoo, of stock price-manipulation charges. The nation’s top court on March 10 asked the Seoul High Court to reconsider whether Yoo, Korea Exchange Bank (004940) and Lone Star’s local unit violated trading rules or evaded taxes, Supreme Court spokesman Seo Dong Chil said by telephone in Seoul at the time.
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