Lone Star to sell KEB to Hana Bank

Deal frustrated ANZ’s intent to purchase Lone Star's 51% stake, which would have boosted its efforts to expand in East Asia.

Lone Star Funds has agreed to sell its 51% stake in Korea Exchange Bank to Hana Financial Group Inc., according to a person close to the transaction, a surprise deal that thwarts a rival attempt by Australia & New Zealand Banking Group Ltd. to purchase the stake.

Lone Star's stake is worth about $3.8 billion based on KEB's latest share price. While the exact terms of the deal weren't yet known, Hana would likely pay a premium of 10% or more to the current market value, the person said.

Lone Star and Hana have signed a memorandum of understanding, and a sales and purchase agreement is expected to follow within several weeks, the person added. The deal will require regulatory approval.

ANZ has been conducting due diligence on KEB with the intent of purchasing Lone Star's stake, which would have vastly boosted the Melbourne-based lender's efforts to expand in East Asia.

A Hana-KEB tie-up could create a strong domestic Korean player that marries Hana's strength as a retail commercial bank with KEB's dominance in trade finance and foreign exchange. But it also means Hana will likely steer clear of the bidding for the South Korean government's 57% stake in Woori Finance Holdings Co. when that process moves forward. Hana and KB Financial Group Inc. have been considered the most probable suitors for Woori.

View the full story in The Wall Street Journal.