HSBC Extends Timetable For Korea Acquisition

by Mary Swire, for LawAndTax-News.com

30 April 2008

It was announced on Tuesday that HSBC and Lone Star have agreed to extend, until 31st July 2008, the deadline for completion of HSBC's proposed acquisition of 51.02% of Korea Exchange Bank, the sixth largest bank in Korea, subject to regulatory approval.

On 3rd September 2007, HSBC Holdings plc announced that its indirect, wholly-owned subsidiary, HSBC Asia Pacific Holdings (UK) Limited had entered into a conditional agreement to acquire 51.02% of the issued share capital of KEB from LSF-KEB Holdings SCA.

The parties have now agreed to extend the deadline for completion of this transaction from 30th April to 31st July, 2008.

Both parties have also agreed that if approval from Korea's Financial Services Commission is obtained during the duration of this agreement, then the long-stop date deadline for completing the acquisition will be extended by two months after the date of FSC approval.

The acquisition agreement already provides that either HSBC Asia or Lone Star may terminate the acquisition agreement if completion has not occurred on or before the long-stop date.

HSBC Asia and Lone Star have agreed further that either of them may terminate the acquisition agreement by giving notice between 1st-7th July 2008 inclusive, but no such notice may be given if FSC approval has already been obtained.

Stephen Green, Group Chairman, HSBC Holdings plc, explained that:

"This is a particularly exciting time for Korea, Asia's third largest economy, especially given the government's stated desire to create a truly global market, building on its already strong economic links to China, Japan, the EU and the US."

"The proposed transaction is entirely in line with our stated strategy to focus on high growth economies and I continue to be of the view that it is in the best interest of all KEB stakeholders and of HSBC."

The purchase price remains as per the original agreement. Accordingly, adjusting for a dividend of KRW700 per share declared and paid in respect of KEB's 2007 annual results, the purchase price is KRW3,170bn plus USD2,833m, amounting in total to the equivalent (at the exchange rate on Friday 25th April, 2008 of USD1.00 = KRW995.28) of approximately USD6,018mn, payable in cash.

In the event that any further dividend is paid by reference to a record date prior to completion of the acquisition, the purchase price will be further reduced accordingly.

Under a shareholders' agreement with Lone Star, The Export-Import Bank of Korea is entitled to require HSBC Asia to purchase, on substantially the same terms, part or all of its shareholding in KEB.

KEXIM's entire shareholding represents a further 6.25% of the issued share capital of KEB.

As originally announced, HSBC Asia does not intend to make a tender offer to KEB's remaining shareholders and, following completion of the acquisition, KEB will remain a company listed on the Korea Exchange.

Sandy Flockhart, Chief Executive of The Hongkong and Shanghai Banking Corporation Limited, commented:

"HSBC has a long history in Korea and this transaction will reinforce our position both in the country and as Asia's number one international bank. HSBC intends to make a full contribution to the further development of the financial services industry in Korea and we remain optimistic that we can complete this transaction as soon as possible."

No other material changes to the acquisition agreement have been agreed between HSBC Asia and Lone Star.

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