October 03, 2005

Goldman PE Buys Another Chunk of Hana


For a market which is closed today, Korea is putting on some serious news flow.

Hana Bank, which has also expressed interest in LG Card, has bolstered its shareholding roster today by selling a 9.4% stake in its new FHC (to be listed 12/1) to Goldman Sachs' private equity unit. GS had previously bought 5m shares in Hana Bank out of treasury stock (~2.5%). It's not clear whether the FHC shares will be new primary ones or taken from other holdings.

Hana is a quite good operation, and certainly GS is getting in cheap, but our worries about the FHC concept are stoked by the presentation below, which is heavily reliant on that old saw, "revenue synergies."

* Hana September IR Presentation

Posted by The Banker at 03:56 PM | TrackBack

Shinhan Grasps at Size


Shinhan's CEO says that the bank (given that the remainder of the FHC is irrelevant, that's what it amounts to) is considering the purchase of LG Card, KEB, or both.

LG Card would likely be a good fit if done at a reasonable price; the card companies belong with banks so that they can cross-sell and enjoy stable funding. I would question whether Shinhan has the existing credit talent to keep the business from going tits-up again, but that caveat applies to almost any domestic bidder.

KEB is a head-scratcher. The obvious motivation is that its acquisition would make Shinhan significantly larger than Kookmin and Woori, and thus itself secure from takeover and able to bask in the prestige of being #1. However, the typical benefits of in-market merger would seem not to apply, given that Shinhan still has yet to integrate the last large bank it bought - Cho Hung.

I'm certain the unions won't be any more pleased about the prospect of integrating KEB with Shinhan Bank, so it would likely be another extended co-habitation under the FHC, which destroys any prospect of cost savings.

The silver lining for shareholders is that I don't see how Shinhan could finance the KEB purchase anyway - Lone Star is not going to take anything but cash on the barrelhead.

Posted by The Banker at 10:37 AM | TrackBack

September 26, 2005

HSBC Is/is Not Looking at KEB, Which Is/is Not For Sale. Got it?

KEB.gif HSBC.gif

Reuters reports HSBC is looking at buying out Lone Star's 51% stake in KEB, a credible story as HSBC has long wanted to be in Korea and KEB is one of only a few possible banks left to buy. Kookmin is too strategic, Woori has cost the government too much money, Hana has other entangling alliances, and Shinhan will very probably do anything to avoid being acquired.

An HSBC official is quoted as saying:

"There will be an announcement on the merger talks soon," the executive was quoted as saying.
An HSBC spokeswoman in London declined to comment, while a Seoul-based spokeswoman for Lone Star told Reuters she had not heard of the talks with HSBC.

HSBC has been down this road before in Korea, most famously trying and failing to acquire Seoul Bank (now part of Hana) starting in 1998, but remains dateless while Citi and Stanchart have already had their fill.

Update: HSBC (somewhat predictably) denies that it will acquire KEB, saying that the quote above

"...is neither based on the fact nor from anyone from our bank," Lee Seung-hoon, a spokesman at HSBC in Seoul told Dow Jones Newswires.
He added that it's too early to say whether HSBC is interested in the acquisition of the country's fifth largest bank because it's not clear whether Lone Star wants to sell its stake or not.

It's certainly clear to me that Lone Star wants to sell - that's their business. Price is an altogether different issue, however. In any case, HSBC routinely denies everything until it happens; I would be frankly astounded if they have never talked with LS about KEB. Perhaps its not to be just now, tho.

Meanwhile, the Korea Times interviews John Bond and comes away with the headline "HSBC Says No Plan to Buy KEB ‘at Present’", which is something of a different kettle of fish as "at present" might mean anything from "this year" to "before dinner."

`We don’t have to do an acquisition to expand our business," said Sir John, explaining why he has previously explored acquiring Seoul Bank, Korea First Bank, and Koram Bank. "We can expand our business in Korea by investing in the businesses we have built over the past 25 years."

Another update: KEB chief and Lone Star appointee Richard Wacker says to the JoongAng Daily that it would be very difficult to see any sale of KEB this year.

According to Mr. Wacker, the Texas-based private equity fund told the managers of Korea Exchange Bank that there were no new developments regarding a sale. He added that his bank has received no requests from Lone Star to make preparations for a sale.

Well, not quite a denial from Lone Star, but perhaps another indication that the fund is holding out for a higher premium than HSBC is willing to pay.

Nevertheless, the HSBC rumour has stirred up the always-fierce Korean unions, who issued a pre-emptive HSBC-bashing manifesto saying they oppose a sale to the UK bank:

"We don't care whether a bidder for our bank is a foreign bank or local bank," the statement said. "But, as for HSBC, it does not offer regular jobs to its new employees. After hiring them for two years, the bank picks only one or two out of every 10 new workers as regular workers. We cannot accept that."

2 out of 10 happy workers would still make KEB's work force happier than that of Citi's Koram, however. Meanwhile, KEB employees' suppressed hostility may be affecting the customers.

Absolutely final update: Hana Bank denies a report that it did not bid for KEB.

Posted by The Banker at 09:34 PM | TrackBack