South Korea plans to order Lone Star Funds to sell most of its stake in Korea Exchange Bank after the US fund was convicted for stock-price manipulation by a Seoul court and lost its qualification as a major holder.
The Financial Services Commission will give Dallas-based Lone Star seven days to provide its opinion on its legitimacy as a KEB stakeholder, the regulator said in an e-mailed statement today. The agency plans to issue an order on October 25 giving the fund a deadline to meet the requirements for holding the stake, after which Lone Star will be asked to sell, according to the statement.
The order would take the buyout firm closer to completing its proposed 4.4 trillion won ($3.8 billion) sale of the 51 percent stake to Hana Financial Group Inc. Lone Star’s efforts to exit its investment in the Korean lender have been delayed for more than five years due to the legal proceedings.
“Lone Star will finally be able to leave South Korea,” said Choi Jung Wook, an analyst at Seoul-based Daishin Securities Co. “The completion of the deal will be a win-win for both Hana and Lone Star. Hana can grow its scale and expand businesses and Lone Star will get the best price for KEB.”
The Seoul High Court on October 6 fined Lone Star 25 billion won for its part in a stock-price manipulation case and sentenced its former local chief, Paul Yoo, to three years in prison. Yoo filed an appeal on October 10. Lone Star decided not to challenge the verdict by an October 13 deadline, avoiding another hurdle to gaining regulatory approval for the sale.
Hana and Lone Star in July extended the deadline for the agreement to sell 51 percent of KEB until November 30, and cut the price by 6 percent.
“Considering that it’s practically impossible for Lone Star to meet the requirements in this case, the FSC will set a minimum period for the fund to meet the conditions,” the agency said today. The regulator didn’t say when it will issue the final order to sell the stake. -By Saeromi Shin and Seonjin Cha