December 1, 2011 / 9:46 AM / in 6 years

UPDATE 1-Lone Star to cut $3.9 bln KEB deal by 11 pct - source

By Ju-min Park

SEOUL, Dec 1 (Reuters) - U.S. investment firm Lone Star has agreed to cut the price of its 4.4 trillion won ($3.9 billion) stake sale in Korea Exchange Bank (KEB) to Hana Financial Group Inc by about 11 percent, said a source familiar with the deal.

Hana’s board would hold a meeting on Friday to approve the deal, the source added.

The source said Hana and the U.S. private equity fund had agreed to lower the purchase price by about 1,490 won per share, or about 11 percent, to 3.9 trillion won.

The source declined to be identified as the deal is not yet public.

Hana, South Korea’s No.4 financial services group by assets, had originally agreed to pay about 13,390 won per share for a 51 percent stake in KEB from Lone Star.

It had sought to close the transaction early this year but had to extend it due to regulatory approval delays and legal disputes involving stock manipulation charges against Lone Star.

Following a guilty verdict on stock manipulation charges, regulators last month ordered the Dallas-based fund to sell down its stake in KEB to below 10 percent within six months.

Acquiring KEB is crucial for Hana as the South Korean banking sector is fast consolidating and the company has most of the financing for the deal in place.

Lone Star bought into KEB in 2003 and has seen two failed sales attempts -- first to Kookmin Bank for $7.6 billion in 2006 and to HSBC Holdings Plc for $6.3 billion in 2008.

Singapore’s DBS group Holdings Ltd twice held talks on a purchase but did not come to an agreement, while Australia and New Zealand Banking Group Ltd entered the fray in 2010 before losing out to Hana.

The sale has been delayed by a series of investigations as to whether Lone Star paid capital gains tax and whether KEB’s losses were inflated to make it cheaper, as well as investigations into and prosecutions of various Lone Star, KEB and government officials.

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