Hana to gain complete control of KEB

Hana Financial Group is on track to take compete control of Korea Exchange Bank as the majority of its shareholders approved a plan to swap Hana shares with remaining KEB shares owned by minority stakeholders at Hana’s extraordinary general meeting on Friday.

The share swap scheme was also approved at KEB’s meeting, but is expected to face growing opposition from KEB minority shareholders and union workers.

The plan, not only to gain 100 percent ownership in Korea’s leading foreign exchange bank but also to delist it from the stock market and merge KEB with Hana Bank, will soon be realized as the Bank of Korea, KEB’s second major shareholder, agreed to exercise its appraisal right.

Hana Financial has set forth two options before KEB shareholders that they can exit their holdings via share swaps or appraisal rights.

Since the central bank, by law, cannot own shares in private companies, in this case, Hana Financial, a BOK official said that it will unload its 6 percent stake in KEB by selling it to Hana Financial, which currently holds a controlling 60 percent stake, at 7,383 won per share, or about 292 billion won in total.

This decision will result in a loss of over 100 billion won ($100 million) for the central bank on its books from the share sale to Hana, given that it has invested some 395 billion won in KEB since 1967.

The official said the central bank is “more than capable of managing the loss.”

However, it will actually reap 203 billion won in profit should it count dividends of some 306 billion won the central bank received over the years as a KEB shareholder, the official argued.

The central bank was given an exception by law to maintain its holdings in KEB in 1989 when the FX bank was privatized, he explained.

Hana has been increasing its stake in KEB since it took over the bank from the U.S. buyout fund Lone Star last year for a 51 percent stake.

The financial group announced in January that it plans to offer a share swap with KEB shareholders, in line with efforts to boost its foreign exchange transactions and trade financing businesses, as well as to avoid possible conflicts of interest between its flagship Hana Bank and KEB.

Since its takeover of KEB, Hana has been facing opposition from KEB shareholders and workers who voiced concerns over restructuring of the foreign exchange bank, while demanding management independence.

Also, some minority shareholders were not satisfied with KEB’s stock price valued at around 7,000 won for share swaps offered by Hana. KEB shares traded at a 52-week high of 9,120 won and at a low of 6,680 won.

Hana Financial Chairman Kim Jung-tae said that it will abide by its promise made on Feb. 17, 2012, and that is to maintain KEB’s brand and its independence over the next five years even after the bank becomes a wholly-owned subsidiary of the group.

An equity swap will take place on Apr. 5, after trading of KEB shares come to a complete stop on Apr. 3. Hana plans to delist KEB from the KOSPI on Apr. 26, as announced.

By Park Hyong-ki (hkp@heraldcorp.com)