DEALTALK-How Hana stole ANZ’s thunder with $4.1 bln KEB buy

* KEB signs deal in five weeks after Hana’s first approach

* ANZ offers $3.7 billion – source

* Hana chairman decides against adviser to maintain secrecy

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By Denny Thomas and Ju-min Park

HONG KONG/SEOUL , Dec 9 (BestGrowthStock) – It was early
in November when ANZ Group CEO Mike Smith travelled to Seoul to
attend the G20 meeting. Aside from the normal executive
schmoozing at the forum, Smith was there because the Australian bank was
on the cusp of clinching its biggest ever acquisition.

Unbeknownst to Smith, his dream of buying into South Korea’s financial
industry was about to be thwarted.

Around the same time, Kim Seung-yu, chairman of South Korea’s Hana
Financial Group was finalising the purchase of a
majority stake in Korea Exchange Bank (KEB) — the same bank
Australia and New Zealand Banking Group Ltd had spent months
studying, with the last few weeks in November expected to be when ANZ inked
the deal.

Instead, Hana sealed the deal with $4.1 billion bid, in what
would be South Korea’s top banking deal and the biggest private equity
transaction in Asia this year.

On Nov. 9, Chairman Kim, a well-known dealmaker in Seoul’s
banking circles, met with Lone Star’s Ellis Short and Michael Thomson
in Singapore’s Convention Centre near Marina Bay along with Credit Suisse
bankers , according to sources with direct knowledge of the
deal.

Texas-based Lone Star is the private equity fund that bought the KEB stake
in 2003, and had tried since 2005 to sell it.

The Singapore meeting came only three weeks after Chairman Kim first
called Short expressing interest in KEB. Lone Star and Hana signed the final
agreement in London in less than five weeks after that first phone call. While
the speed of the sale to Hana was abnormally fast, getting to that point
wasn’t.

Five years after Lone Star first launched the sale, after two
collapsed deals, legal actions, an office raid, dumped advisers, bad press, a
financial crisis and a rapid market recovery, Lone Star is getting ready to
close the most contentious and widely publicised private equity exits ever in
Asia.

SINGAPORE DATE

Hana never formally entered the auction, but Hana’s Kim secretly eyed KEB,
said the sources , who were not authorised to speak publicly about the
deal.

Kim knew market preferred a Hana-KEB merger over KEB buying South Korean
government’s $6 billion stake in Woori Financial Holding Co Ltd .

To keep the talks under wr aps and to save on fees, Kim decided not to
use any advisers, another rarity given the size of the stake.
In the coming weeks, Hana and Lone Star stayed in touch via
conference calls, with just six people involved in the talks. Having reached
some agreement, Kim agreed to meet Lone Star’s Short and Thomson in Singapore
– chosen as a middle ground and to avoid the media glare, sources said.

“That (Singapore meeting) would be a kind of engagement,” one source said.
While Lone Star and Credit Suisse were thrilled by Hana’s surprise entry, they
still had doubts.

Hana and ANZ declined to comment and Lone Star could not be reached for a
comment. Credit Suisse, along with ANZ advisers JP Morgan
and Goldman Sachs also declined to comment.

PREVIOUS CONNECTIONS

When the auction received a lukewarm response, Credit Suisse rekindled its
old ties with ANZ. Rob Jesudason, Credit Suisse’s Asia-Pacific financial
industry group head, had advised ANZ on its purchase of certain assets owned
by the Royal Bank of Scotland .

Judging that Smith had an unfinished agenda in Asia, Jesudason, along
with Credit Suisse Asia-Pacific M&A head Joseph Gallagher reached out to ANZ,
which had set its sights on become a super-regional Asian lender.

ANZ’s deal team, led by Alex Thursby and strategy head Joyce Phillips,
with advisers Goldman Sachs and J.P. Morgan studied KEB’s books for three
months. That resulted in an indicative offer of $3.7 billion, sources said.

Lone Star, which was looking for 1.3 times price to book value, was not
impressed.

LONE BIDDER?

Smith is seen as a disciplined deal maker, but some sources said his offer
also reflected the view that ANZ was the only real contender for KEB. The
warnings about a rival bidder were not taken seriously, they said.

There were other reasons why ANZ’s offer did not cause celebration in the
Lone Star camp.

For one, ANZ proposed performance clauses for KEB, offering to stagger the
payments to ensure KEB met the various performance metrics, another person
familiar with the process said.

ANZ also feared losing some key clients as a result of the takeover by a
foreign buyer, the source added, including the potential loss of Hyundai and
its sister firms taking out some of their day-to-day banking deals with KEB.

When Hana emerged at the last minute, its $4.1 billion offer was a shock
to ANZ, and one the Australian bank knew it would have a hard time competing
against. ANZ was not interested in a bidding war, abruptly ending Smith’s
Korean journey.
(Additional reporting by Narayanan Somasundaram in SYDNEY; Editing by Michael
Flaherty and Lincoln Feast)

DEALTALK-How Hana stole ANZ’s thunder with $4.1 bln KEB buy