Lone Star may sue S.Korea gov’t on KEB deal

Deals

US private equity house Lone Star is seriously considering suing the South Korean government if it delays approval of the firm's $6.3 billion sale of shares in a local bank.

English language daily The Korea Times said Lone Star was mulling a suit claiming losses from the government for delaying the sale of shares in Korea Exchange Bank (KEB).

Lone Star's PR agency in Seoul declined to comment and a lawyer representing Lone Star was not available for immediate comment.

Last September, Lone Star agreed to sell its 51% stake in KEB the country's No. 6 lender, to UK-based HSBC for $6.3 billion.

But HSBC's offer lapsed on July 31, with the government delaying approval of the KEB sale, citing legal uncertainties relating to Lone Star's South Korean activities. The deal is still awaiting regulatory approval.

“Beleaguered with growing complaints from investors, Lone Star is considering returning its KEB shares in-kind to investors as one possible option, together with a block sale option,” the Korea Times cited an unnamed source close to the deal as saying.

“Investors have urged Lone Star to speed up the KEB sale, and recently demanded the fund return its KEB shares or conduct a block sale if the deal is delayed beyond September due to legal problems,” he said.

The source added that Lone Star had received approval from the investors on the matter.

The newspaper also cited another source as saying that Lone Star had set the end of September as the deadline for it to take action.

The report comes after South Korean regulator, the Financial Services Commission, said on Tuesday it may fine the Dallas-based fund for failing to submit regulatory documents by the August 31 deadline.

If fined, Lone Star would be disqualified from becoming a top shareholder in any South Korean bank and therefore ordered to immediately sell shares in the lender, which analysts said could prompt HSBC to seek to lower its offer. (Reuters)

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