SEOUL: Global banking giant HSBC announced yesterday it has scrapped a $6 billion deal to buy a major South Korean bank after the international credit crisis cut asset values.
HSBC said in a statement it had terminated the deal to buy a 51 percent stake in Korea Exchange Bank (KEB) from US buyout fund Lone Star, “taking into account all relevant factors including current asset values in world financial markets.”
The statement said discussions with Lone Star “have not led to agreement on how the transaction might proceed on a basis acceptable to HSBC,” apparently indicating differences over pricing.
The transaction had also been dogged by legal disputes over Lone Star’s 2003 purchase of KEB. South Korea’s watchdog Financial Services Commission (FSC) had not yet given approval for the latest deal. “In the light of developments around the world, not least changes in asset values in world markets, we do not believe that it would be in the best interests of shareholders to continue to pursue this acquisition on the terms negotiated last year,” said Sandy Flockhart, HSBC’s CEO for Asia.
He said in the statement that HSBC would now focus on its own growing operations in Korea. FSC Chairman Jun Kwang-woo told reporters there was “a considerable gap” between the two parties on pricing. The watchdog expressed regret at the move, saying it had been working hard to speed up approval of the deal.
“It is regrettable that HSBC unilaterally scrapped the deal at a time when the FSC was actively considering it for approval,” said Kim Kwang-soo, head of the commission’s financial service division. “We are disappointed that HSBC terminated the agreement and that the transaction will not be completed,” said Lone Star Chairman John Grayken in a brief statement.