M&A

22 November, 2009

UPDATE 1-KEB shares hit 17-mth peak on Hana Fin interest

* Hana chairman says KEB an M&A candidate

* Hana says financing not a big problem (Adds background)

SEOUL, Nov 23 (Reuters) - Shares in Korea Exchange Bank (KEB) (004940.KS) jumped more than 5 percent to the highest in more than 17 months on Monday, after bigger rival Hana Financial Group (086790.KS) expressed interest in buying a stake in the country's No.6 lender.

U.S. private equity house Lone Star [LS.UL] is believed to be restarting the sale of its 51 percent stake in KEB, worth 6.25 trillion won ($5.4 billion) at the current market price. The deal is expected to be the largest banking deal in South Korea.

If Hana joins in the prospective auction, it may compete with sector leader Kookmin Bank, a unit of KB Financial Group (105560.KS) and state-owned Korea Development Bank, which both have recently expressed their intentions to bid for KEB. [ID:nSEO304869]

Hana Financial Chairman Kim Seung-yu told reporters over the weekend that he was open to mergers and acquisitions, and that KEB was a candidate.

"We can raise funds in various ways. I don't think financing is a big problem," Kim said.

KEB has strength in foreign exchange trading and trade financing, with 324 domestic branches and 7,000 employees. Its overseas business network in more than 20 countries is also coveted by domestic peers.

Previous attempts by Lone Star to sell its majority stake in KEB to Kookmin Bank for $7.3 billion in 2006 and to HSBC (HSBA.L)(0005.HK) for $6.3 billion in 2008 failed because of legal disputes over the private equity firm's South Korean activities and price differences.

A KEB sale is expected to prompt consolidation ion the sector ahead of the government's planned sales of stakes in third-ranked Woori Finance Holdings (053000.KS) (WF.N) and Korea Development Bank.

KEB shares rose as high as 15,450 won, their strongest level since early June 2008. By 0215 GMT, they were up 2.4 percent at 15,000 won, with 1.3 million shares changing hands.

On Nov. 17, KEB briefly rose 5.5 percent with 4.1 million shares traded. The volume marked KEB's biggest daily transaction in more than a month after Kookmin Bank CEO Kang Chung-won was quoted by a local news media as saying the bank had confidence in seeking an acquisition of KEB and that the move could come next year. [ID:nSEO201686] ($1=1157.9 Won) (Reporting by Kim Yeon-hee; Editing by Chris Lewis) ((yeonhee.kim@thomsonreuters.com; +82 2 3704 5646; Reuters Messaging: yeonhee.kim.reuters.com@reuters.net)) ((If you have a query or comment on this story, send an email to newsfeedback.asia@thomsonreuters.com))

Source: http://www.reuters.com