RETAIL BANKING | Tony Chua, Korea

Lone Star not to appeal Korean court ruling

Hana shares soared on speculation that its takeover of KEB will progress as court proceedings seen to end.

Lone Star Funds declined to appeal a conviction for stock-price manipulation in Korea, the nation’s financial regulator said, avoiding another hurdle to gaining approval for its $3.8 billion sale of a stake in a local bank.

The Financial Services Commission began a review to determine the legitimacy of Lone Star’s eight-year-old stake in Korea Exchange Bank after the U.S. buyout fund told the regulator about its decision, Kim Seok Dong, chairman of the regulator, told reporters in Seoul Thursday. The FSC plans to announce its position early next week, said Kim, whose remarks were confirmed by the agency’s spokesman Ernst Lee.

Refraining from an appeal would end a five-year legal dispute that has delayed the fund’s 4.4 trillion won ($3.8 billion) sale of its stake in Korea Exchange to Hana Financial Group Inc. for almost a year. Hana shares advanced Thursday on speculation that the takeover will progress as court proceedings draw to a close.

“The deal will gain pace,” said Hong Ki Seok, an analyst at Kyobo AXA Investment Managers Co., which oversees the equivalent of $4.9 billion. “Hana may be the best buyer of Korea Exchange for now, given the global market turmoil. It’ll be tough for Lone Star to find domestic or international buyers who would be willing to pay a higher price than Hana.”

Dallas-based Lone Star has until the end of Thursday to appeal to Korea’s highest court against its Oct. 6 conviction. The FSC said last week that it may order Lone Star to sell most of its stake in Korea Exchange Bank if the ruling stands.

View the full story in Business Week.

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