The labor union of Korea Exchange Bank is bracing for an all-out struggle, including a general strike, to block Hana Financial Group from acquiring the lender, which they fear could lead to a massive restructuring, sources said Tuesday.

U.S.-based Lone Star Funds plans to sell its controlling stake in the bank to Hana this year, which is opposed by a majority of the bank’s workers.

“They had hoped that their bank would be acquired by the state-run Korea Development Bank,” a local bank official said. “They don’t believe the entity of Hana Bank-KEB can generate a synergy effect.”

The KEB employees are waiting for the outcome of the ongoing inquiry by the Financial Services Commission into whether Lone Star was eligible to become the majority shareholder of the bank in 2003, he said.

A leader of the unionized workers also said they will closely monitor if FSC Chairman Kim Seok-dong will keep his word, who said a week ago that “the financial watchdog will conclude the issue in a way that the public could accept.”

A union leader criticized the nation’s fourth-largest financial group is hurrying to take over the bank without conducting due diligence.

“Approval of the merger without resolving significant issues could lead to a major scandal and misfortune.”

An official in the financial market also issued the possibility that the Hana-KEB deal will bring about massive labor strife of the kind that confronted a merger in 2003 between Shinhan Financial Group and then state-run Chohung Bank.

Until the branches of Shinhan and Chohung were integrated in 2006, the latter’s union went on strikes several times for about two years.

Lone Star, which seeks to reap gains of some trillion won from its investment in the Korean bank in 2003, has allegedly been pressuring Hana to obtain regulatory endorsement from the FSC as early as possible.

There are allegations that Hana has been obliged to pay the U.S. buyout fund penalties if the merger proposal is not approved within six months after the signing of the memorandum of understanding between the two traders last November.

A banking research analyst said the feasibility of the KEB union’s full-scale sit-in protest is up to the decision of the FSC.

Critics including economists and non-government organizations continue to claim that Lone Star had no right to purchase a controlling stake in any Korean commercial bank on the grounds that the fund was ― and is ― a “non-financial” investor.

By Kim Yon-se (kys@heraldcorp.com)