Lone Star selling stake in Korea Exchange Bank

Lone Star, the Texas-based private equity firm, is discussing selling a 25 percent stake in Korea Exchange Bank to buyout fund MBK Partners after talks with rival bidder Australia and New Zealand Banking Group (ANZ), failed to date to produce a bid for a 57 percent stake. The 57 percent stake would be worth about $4.5 billion, but ANZ has not yet done its due diligence.

(Reuters) – U.S. private equity firm Lone Star is in talks with buyout fund MBK Partners to sell a 25 percent stake in Korea Exchange Bank, as rival bidder ANZ has yet to make an offer for a 57 percent stake in the South Korean firm, a report said.

Australia and New Zealand Banking Group is the only bidder so far to publicly express an interest in KEB , and it has yet to complete due diligence for the stake worth about $4.5 billion at the current market value.

“There’s not much competition over KEB stake unfortunately but a partial sale to MBK sounds unlikely to me, especially when Lone Star is already in talks with ANZ,” Ku Yong-uk, an analyst at Daewoo Securities, said on Tuesday.

“Fundamentally, it comes down to a matter of pricing. Differences between the seller and the potential buyer need to be narrowed.”

ANZ began due diligence on KEB in mid-August and sources have said the bank is expected to decide by mid-October whether to bid for the 57 percent stake on offer.

“There is no response other than what we have already disclosed to the market. Due diligence continues,” an ANZ spokesman said.

Lone Star, which has been trying to sell KEB for at least four years, is separately negotiating with MBK to sell a portion of its stake in case its deal with ANZ collapses, the MoneyToday online media outlet reported on Tuesday, quoting sources close to the KEB deal.

MBK, which focuses on north-east Asia, has been keen to buy a stake in KEB and had approached Nomura Holdings , sovereign wealth funds and South Korean government pension funds to partner with it to buy 51 percent of KEB, sources familiar with MBK’s plan had previously told Reuters.

But MBK however failed to put together a group to bid for a controlling stake, the sources said.

MoneyToday said MBK had completed due diligence on KEB in August and both MBK and ANZ were offering between 13,000 and 15,000 won per KEB share. KEB shares were unchanged at 13,500 won on Tuesday after rising as high as 13,850 won.

MBK was not immediately available for comment.

Credit Suisse Group AG , which advises Lone Star, was also not immediately available for comment.

The report said Lone Star favours a deal with ANZ because it has yet to receive funding plans from MBK and because South Korean regulators may disapprove a buyout fund as a top shareholder of a local lender.

The U.S. fund is in talks with MBK to put pressure on Australia’s No. 4 bank to make a more competitive bid, it said.

Analysts in Australia still expect ANZ to bid between 1 and 1.2 times book value for KEB, or just above the current market price, but have said this is not a must-do deal for the bank.

If successful, the KEB deal will represent ANZ’s biggest ever acquisition as it steps up its effort to become an Asia-focused regional bank, on the lines of HSBC Holdings and Standard Chartered . (By Miyoung Kim. Additional reporting by Jungyoun Park in SEOUL and Michael Smith in SYDNEY; Editing by Ken Wills and Anshuman Daga)