HSBC, Europe's biggest bank by market value, may walk away from a proposed US$6 billion purchase of a majority stake in Korea Exchange Bank because of delays in getting regulatory clearance for the deal.
HSBC is still awaiting regulatory approval to acquire buyout fund Lone Star Funds' 51-percent stake in Korea Exchange, said Asia-Pacific Chief Executive Officer Sandy Flockhart. A self-imposed deadline for getting approval expires on July 31 after being extended by three months, Bloomberg News said.
"After the three months, both sides will have to consider their positions," Flockhart said. "We have other options."
Hana Financial Group, owner of the nation's fourth-biggest bank, yesterday said it may seek to purchase Korea Exchange should the HSBC deal collapse. London-based HSBC agreed in September to buy control of Korea Exchange to help it catch up with rival Standard Chartered, which beat HSBC to buy Korea First Bank in 2005.
"HSBC can't wait forever for regulatory approval, which is clearly going to take a long time," said Ko Seoung Pil, of CJ Asset Management Co. in Seoul. "It would be better for HSBC to reserve capital for a better buy."
Korea Exchange Bank, the nation's sixth-largest, fell 500 won (49 US cents), or 3.3 percent, to 14,500 won in Seoul yesterday, while the benchmark Kospi index gained 0.4 percent.
Hana Financial lost out to Kookmin Bank in bidding for Korea Exchange in 2006. Kookmin, South Korea's biggest bank, was in turn forced to scrap plans to buy Korea Exchange in November that year because of a criminal investigation into Lone Star.
"We're interested in bidding for Korea Exchange if the deal with HSBC fails," Jeong Jae Hoon, a Hana spokesman, said yesterday.
HSBC extended a deadline for buying control of Korea Exchange from Lone Star to July 31 from April 30 amid a criminal investigation into Lone Star's 2003 acquisition of the bank. Korean regulators have postponed approval until legal disputes involving the Dallas-based fund were resolved.
"We still firmly believe that the HSBC deal will be the best choice for the future of KEB," said Lee Nahm Yon, a spokeswoman for Seoul-based Korea Exchange.
Lone Star's South Korea head, Paul Yoo, will get a ruling on June 17 on his appeal against a conviction for stock-price manipulation. He was jailed in February for five years for manipulating the stock price of Korea Exchange's credit card unit.