UPDATE 1-ANZ seen deciding on KEB bid by mid-Oct -sources

* A successful deal will be ANZ’s biggest ever acquisition

* ANZ has surplus capital of about $6 billion

* ANZ taking a conservative approach to pricing – source

* May bid 1.3 to 1.4 times book, lower than some
views-source
(Adds details of likely moves, background)

SYDNEY, Aug 17 (BestGrowthStock) – Australia and New Zealand
Banking Group (ANZ.AX: ) is expected to decide by mid-October
whether to bid for a majority stake in Korea Exchange Bank
(004940.KS: ), worth about $4 billion at current prices, three
sources said on Tuesday.

If successful, the KEB deal will represent ANZ’s biggest
ever acquisition as Australia’s No. 4 bank steps up its effort
to become an Asia-focussed regional bank, on the lines of HSBC
Holdings (HSBA.L: ) and Standard Chartered (STAN.L: ).

ANZ is set to start inspecting the books of KEB, South
Korea’s fifth-largest bank, in the next several days, said the
sources, who asked not to be identified because they are not
authorised to speak to the media.

Private equity firm Lone Star [LS.UL] owns 51 percent of
the 57.3 percent stake on offer at KEB with the balance held by
the Export Import Bank of Korea.

One source said ANZ would consider a bid around 1.3 to 1.4
times KEB’s book value, or around $5 billion.

That is above the bank’s current market valuation but at
the lower end of some analysts’ estimates. Citigroup analysts
said in a note to clients on Monday ANZ could pay up to A$6.5
billion ($5.8 billion).

“ANZ wants to play it conservative. A bid should be closer
to the book value, not too high. But they need to run through
the numbers first,” said the source with direct knowledge of
the matter.

An ANZ spokesman declined to comment.

On Monday, ANZ moved a step closer to launching a bid for
KEB after saying that it will conduct due diligence on KEB. ANZ
first expressed interest in KEB in April and hired Goldman
Sachs (GS.N: ) and JPMorgan (JPM.N: ) as its advisers.

ANZ is eyeing KEB to accelerate its Asia focus that
blossomed in 2007 after Michael Smith, previously HSBC’s Asia
head, took over as Chief Executive. KEB also offers ANZ an
opportunity to put to good use the some $6 billion in surplus
capital it has.

KEB is among the few meaningful opportunities available in
Asia, where high price and stiff ownership regulations make
bank acquisitions tough. ANZ wants to ring in a fifth of its
profit from Asia by 2012 from 14 percent now.

Its plan to buy a controlling stake in Indonesia’s PT Bank
Panin fell through in June on price differences.
[ID:nSGE65L016]

KEB’s ties to small- and medium-sized companies, trade
finance and foreign exchange businesses plus its reach through
353 branches fits well with ANZ’s strategy to target trade
flows though Korea is a low return market, analysts say.

And with its surplus capital, funding the deal is going to
be easy, they say.

Lone Star has been trying to sell KEB for four years at
least. A $6.3 billion bid by HSBC (0005.HK: ) (HSBA.L: ) fell
through in the wake of the global financial crisis. At that
time ANZ’s Smith was one of the architects of the deal.

Lone Star also had an agreement with Kookmin Bank, a unit
of KB Financial Group (105560.KS: ), to buy KEB in 2006.

But the deal was scuppered after South Korean prosecutors
launched an investigation into whether KEB’s financial strength
was deliberately understated when Lone Star acquired the bank
in 2003.

In June 2006, a South Korean government audit cleared Lone
Star of any wrongdoing.

The only other interested party so far is MBK Partners. But
sources said last week it has failed to put together a group to
bid for the stake. [ID:nSGE67902T].
($1=1.114 Australian Dollar)
(Reporting by Narayanan Somasundaram; Additional reporting by
Denny Thomas in HONG KONG; Editing by Muralikumar
Anantharaman)

UPDATE 1-ANZ seen deciding on KEB bid by mid-Oct -sources