S.Korea cautions KDB on global bank M&A hunt

SEOUL, Aug 25 (Reuters) - A top regulator on Monday voiced concern about state-run Korea Development Bank's (KDB) interest in buying a global bank, saying it should be just a "cheerleader" and let local private banks take the lead in any such purchase.

KDB said on Friday it was open to the acquisition of an overseas financial institution, naming Lehman Brothers Holdings Inc LEH.N as one of its options. [ID:nSEO332057]. The comments sent Lehman's share price up 12 percent on the day.

"I think that KDB might have considered forming and leading a consortium (to buy Lehman Brothers)," Financial Services Commission (FSC) Chairman Jun Kwang-woo told reporters.

"But it appears burdensome for a state-run institution to play a leading role (in the purchase of a foreign company) and take risks which may be more than financial."

Cross-border acquisitions by South Korean companies should be led by the private sector and state-run institutions such as KDB should play a "cheerleader role", Jun said.

"My point is that state-run institutions may take a catalyst role in pursuing these kinds of deals."

Jun also said that KDB needed to consider its priorities before pursuing global expansion, pointing out that stabilisation of the domestic financial markets might be the most urgent issue.

When asked about the status of KDB's possible interest in Lehman, one of Wall Street's victims of the subprime mortgage meltdown, he said: "That would be an international marriage. Would you get married just after one or two blind dates?"

KDB has not publicly confirmed that it directly approached Lehman.

The government is planning to privatise KDB by 2012, a process it hopes will help turn it into a global investment bank.

(Reporting by Kim Yeon-hee; Editing by Jonathan Hopfner and Jonathan Thatcher)