HSBC Says Committed to KEB, But Can't Wait Forever

HSBC said on Monday it was committed to a $6.3 billion takeover of South Korea's No. 6 bank, but warned it would not wait forever for approval of a deal seen as a major test of the country's openness to foreign investors.

A newspaper report the deal might fall through had pushed shares in the target, Korea Exchange Bank, more than 2 percent higher on expectation that if HSBC   pulled out there might be a bidding war among domestic banks for KEB.

"HSBC is committed to the acquisition, but we can't wait forever," the bank quoted the head of its South Korean operations, Simon Cooper, as saying.  "We are hopeful that the government will take appropriate action."

The London-based bank extended the deadline in April on its offer to buy a majority of KEB from U.S. investment fund Lone Star by three months to the end of July, which awaits South Korean regulatory approval.

Lone Star's PR agency in Seoul and KEB declined to comment.

The new conservative government of President Lee Myung-bak, which took office in February, has made clear it recognizes that the KEB deal will be seen as a litmus test of its pledge to opening up Asia's fourth largest economy far wider to foreign investment.

But the deal has been held up by legal disputes over Lone Star's 2002 KEB purchase and its involvement in controversial decisions by the South Korean bank.

Chairman of the regulatory Financial Services Commission (FSC), Jun Kwang-woo, told reporters in April that the government was studying how to help seal the KEB sale, hoping for a quick  resolution.

But he said there was no change to its basic stand that a final decision would have to wait for the legal disputes to be settled in the courts.

Jun is due to meeting financial regulators and executives of European banks on a trip to Paris and London this week.

Earlier, the Financial Times on its Web site (www.ft.com) reported that HSBC may drop out of the delayed KEB purchase if no progress is made within weeks.

"Sentiment is finely balanced but HSBC would likely look ... elsewhere if there is no movement," it quoted an unnamed person familiar with the British bank's thinking as saying.

But some analysts said they expected the deal to go through eventually. "If the deal is pulled, that would not be good for the growth of HSBC's business in Asia," said Y.K. Lee, an analyst of Core Pacific-Yamaichi.

Han Jeong-tae, an analyst at Hana Daetoo Securities, said that domestic banks would likely jump into the bidding if HSBC quit. "Their rising interest in KEB would make M&A momentum stronger and in a consequence could be a favorable factor for KEB shares," he added.

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