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FSC may approve Hana’s takeover of KEB in March

The Financial Services Commission is expected to approve Hana Financial Group’s takeover of Korea Exchange Bank in March, an official said on Monday.

“There seems to be no major problem with its funding plans,” said an FSC official.

He said the regulatory body is likely to approve Hana’s request at a meeting on March 16.

His remark came after several securities firms raised the possibility that Hana will face hurdles in its planned takeover.

The financial group would have to pay penalties to KEB’s biggest shareholder Lone Star Funds in case it fails to obtain M&A approval by the end of March.

Hana Financial failed to list their new stocks on Feb. 28 as scheduled, which is a procedure to pay takeover funds to Lone Star, due to a lawsuit.

The reviewing process for the antitrust-ruling by the Fair Trade Commission has been delayed. The FTC is expected to submit the result of its review to the FSC next week.

Last week, minority shareholders filed a suit against Hana Financial with a Seoul court, claiming that the group infringed on shareholders’ rights by issuing unnecessary stocks worth 1.33 trillion won ($1.18 billion).

The Korea Exchange also unveiled its position that it would put off the listing process for the new Hana shares until the issue is settled.

As a countermeasure, Hana Financial filed for an injunction with the court against the Korea’s Exchange’s delaying of the listing.

Though foreign brokerage firms said Hana Financial will eventually succeed in the stock issuance, they do not rule a possibility that financial regulators will delay the endorsement process.

Daiwa Securities forecast that the regulatory approval would be postponed if the lawsuit on new stocks will linger on.

Switzerland-based UBS said the risks involving the M&A deal is expanding, which is also affecting stock prices.

The brokerage firm also said the situation has become a factor which makes analysts reassessing the financial group’s stocks.

The financial regulator FSC is also waiting for the ruling of the FTC on whether Hana’s planned acquisition of KEB would go against the antitrust regulations.

Should Hana Financial fails to pay takeover funds to Lone Star by the end of March, the group has to give additional payments of 100 won per share in case of one-month delay.

Considering that Lone Star holds 329 million KEB shares, Hana Financial should pay 32.9 billion won in penalty in April and 65.8 billion won in penalty in May.

Another long-standing issue, which could be a hurdle for the takeover, is Lone Star’s eligibility as the largest shareholder of the Korean bank.

Regarding the issue whether Lone Star had been eligible to purchase more than 50 percent of KEB stake, FSC Chairman Kim Seok-dong has recently said regulators are reviewing it.

He said regulators will finalize the issue “in accordance with laws.”

The FSC was ordered by courts in January and in September 2009 to publicize the documents which it has been examining to determine Lone Star’s eligibility for KEB control since 2007.

But it rejected the order and appealed with the highest court.

Korean law bans industrial capital from taking more than 9 percent of a bank. A firm is categorized as industrial capital when its non-financial assets exceed 2 trillion won or its holdings of non-financial concerns account for at least 25 percent of its total capital.

The FSC began the review in 2007 after civic groups raised the possibility that the U.S. private equity fund could be industrial capital.

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