Tuesday, January 11, 2005
StanChart to acquire Korea First
Peter Thal Larsen / London January 11, 2005
Standard Chartered has won the bidding war for Korea First Bank with an offer valuing South Korea’s eighth-largest bank at about Won3,500 billion ($3.3 billion) in cash and vindicating the UK bank’s strategy in Asia.
The bank was tipped to have beaten HSBC in the bid for KFB after people close to the talks said on Sunday that Standard Chartered was close to finalising a deal with Newbridge Capital, the US private equity group that owns 49 per cent of KFB.
On Monday the private equity group agreed to sell its holding and exercise its rights to require the South Korean government, which controls the remaining 51 per cent, to sell its shares to Standard Chartered.
The deal, which is still subject to regulatory approval, will increase Standard Chartered’s presence in Korea, where it currently operates only one retail branch, and enable it to expand its services beyond commercial banking, treasury and debt capital markets into consumer banking.
The bank expects to complete the transaction by April 2005 and that Korea First Bank will contribute 16 per cent of total revenue once it is integrated into Standard Chartered. That would make South Korea Standard Chartered’s second-largest market in terms of assets in Asia after Hong Kong.
Standard Chartered began preparing a share placement of about £1.9 billion ($1.9 billion), worth approximately one-tenth of the bank’s market capitalisation, to help it fund the deal while providing spare capital for future expansion.
A successful deal would be a vindication for Standard Chartered, which had previously missed out on several large acquisitions in Asia and appeared to have lost out again when HSBC emerged as the favourite to clinch KFB late last year. Standard Chartered later surprised its larger rival with a late bid that was put together over the Christmas holiday.
Standard Chartered has long been interested in expanding in South Korea, Asia’s third-largest economy.
It signalled its interest when it bid for KorAm, the lender that was bought by Citigroup for $2.7 billion last year.
Standard Chartered’s bid values KFB at about 1.85 times book value similar to the multiple that Citigroup paid for KorAm.
Under London stock exchange rules, Standard Chartered can place up to 10 per cent of its share capital with investors without triggering the requirement that it offer the rights to all existing shareholders.
On Friday, Standard Chartered shares closed at 953p, valuing the bank at £11.21 billion.
In recent months, Standard Chartered has also acquired a 51 per cent stake in Permata, the Indonesian bank, for $305 million. It has also gained a foothold in mainland China by buying a 20 per cent in Bohai, a start-up bank.
Aadditional reporting with Francesco Guerrera & Anna Fifield