Hana faces delay in approval of KEB buy

Regulatory approval for Hana Financial Group Inc.’s acquisition of Korea Exchange Bank may come later than expected, which could push up the group’s cost for the takeover deal, sources said Thursday.

Hana Financial expected to receive regulatory approval around February for its Nov. 25 contract with U.S. buyout firm Lone Star Funds to take over a 51.02 percent stake in KEB for 4.69 trillion won ($4.2 billion).

Hana Financial needs regulatory approval to execute the acquisition in order to incorporate the smaller banking rival into its subsidiary. Financial authorities plan to look into Hana Financial’s eligibility as the biggest shareholder in KEB, the validity of the group’s acquisition funding plan and the transaction’s impact on Hana Financial’s fiscal health.

“Hana Financial requested that approval come during February, but (we) can only finalize it by late March at best, or early April,” a financial regulation official said. Given the average time needed to grant similar approval, the regulatory decision is not likely to come before late March, he noted.

Additional screening by the anti-trust watchdog Fair Trade Commission could also drag out final approval, authorities said.

The expected delay in the regulatory process adds concerns of an additional financial burden on Hana Financial.

By contract terms with Lone Star, Hana Financial is forced to pay an additional 32.9 billion won, or 100 won per share, for the stake should regulatory approval come one month later than March. A two-month delay could drive additional costs to 65.8 billion won.

“By the contract, the takeover transaction is finished only after Hana Financial pays the acquisition funds in five business days following regulatory approval,” a Hana Financial official said. The group will make every effort to obtain the approval as soon as possible, he said.

Hana Financial, the fourth-largest banking group in Korea, is in talks with local and foreign investors to invite them to help finance a quarter of the funds needed to buy KEB.

The group plans to raise nearly 1.2 trillion won through bond issuance scheduled for later this week for the stake purchase deal.

It secured half of the takeover money from internal funds, mainly dividends from its flagship unit Hana Bank. 

(Yonhap News)