|
Lone Star chairman John Grayken said Tuesday the embattled offshore fund is ¡°talking about terminating¡± a deal with Kookmin Bank to sell off its majority stake in Korea Exchange Bank as the legal noose tightens around the firm. This is the first time the private equity fund has mentioned scuppering the deal and the strongest threat so far in response to an ongoing investigation of massive irregularities in its bargain-basement takeover of the ailing bank in 2003.
"We are considering internally what to do," Grayken said in an interview with the Financial Times. "In light of this investigation being extended again, and the issuance of arrest warrants against Ellis [Short] and Mike [Thomson], we are considering what we should do with Kookmin. We're talking about terminating.¡± Short and Thomson, Lone Star's vice-chairman and legal adviser, have a warrant out for their arrest in Korea for alleged share manipulation in the takeover. The FT reports the decision is to be finalized in the next few days. Kookmin, Korea¡¯s largest lender, is on alert.
 |
|
Supreme Court Chief Justice Lee Yong-hun and Prosecutor General Choung Sang-myoung walk to their offices on Wednesday morning amid a deepening standoff between courts and prosecution over the repeated refusal to issue arrest warrants for Lone Star executives./Newsis
|
 |
|
What Lone Star wants
The overwhelming opinion in the domestic financial industry is that Grayken¡¯s announcement is a bargaining chip to pressure the government and prosecutors besides an attempt to secure profits from KEB dividends. But some say the fund is not bluffing. "Lone Star may change its strategy by giving up the deal with Kookmin, taking back its investment gradually over the next two or three years from KEB dividends and selling KEB to a third party,¡± says Han Jung-tae, an analyst at Mirae Asset Securities. KEB has some W2 trillion (US$1=W934) worth of profits which can be paid out in dividends. Since Lone Star has a 64 percent stake in the bank, that would net it W1.3 trillion in dividends this year alone. The only problem for the thrifty fund is that it would have to pay 15.4 percent tax on dividend, which would cap its stellar profits.
Kookimin Bank in a bind
Kookmin Bank said Wednesday it has not discussed any termination of the deal with Lone Star nor received any notice of the termination, but it was clearly embarrassed by the announcement. "The negotiation channel between us and Lone Star has been closed for a long time,¡± a Kookmin executive said. ¡°We¡¯re closely looking at measures to prepare for any eventuality.¡± If the deal breaks down, it would deal a severe blow to Kookmin's ambitions to go global, its core growth strategy. But the bank is in a dilemma: If it yields to Lone Star on the dividend issue, which requires its approval as preferred bidder while the contract holds, it may find itself accused of helping the fund pull out of Korea with impunity.
(englishnews@chosun.com )
|
