RETAIL BANKING | Tony Chua, Korea

Hana and Lone Star slash KEB deal price by 6%

But analysts say contract extension is enough to convince investors that the two companies can close the deal.

Lone Star Funds agreed to cut the price of Korea Exchange Bank to 4.4 trillion won ($4.2 billion) and extended the sale deadline as South Korean regulators delay approving Hana Financial Group Inc.’s takeover.

Hana will pay 6 percent less than the initial price of 4.7 trillion won ($4.45 billion), for a 51 percent stake in KEB, and set Nov. 30 as the new completion date, according to a regulatory filing on Friday. The previous terms allowed Hana or the Dallas-based fund to scrap the deal if was incomplete by May 24 this year.

Lone Star is using record dividend payments to recoup its investment in the Seoul-based bank and agreed to cut the sale price further if it gets more payouts before the deal closes. Hana Chairman Kim Seung Yu aims to narrow the gap in assets and market value with bigger rivals KB Financial Group Inc. and Woori Finance Holdings Co. with the purchase, which is on hold until a court case involving Lone Star is resolved.

“Extending the contract isn’t enough to convince investors that Hana and Lone Star can complete the deal,” said Lim Jeong Seok, head of equities at Seoul-based KDB Asset Management Co., which oversees the equivalent of $11 billion in assets. “The uncertainty won’t end until the regulators give their go- ahead.”

Under the agreement last Friday, Hana will pay Lone Star 13,390 won for each KEB share, down from 14,250 won, according to the filing. Hana rose 0.3 percent to 38,800 won ($36.71) at the close of Seoul trading. The stock has lost 10 percent this year.

View the full story in Bloomberg.

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