U.S. private equity firm Lone Star sold a 13.6% stake in Korea Exchange Bank (KEB) in an increased block trade, raising $1.28 billion, a source familiar with the deal said on Friday.
KEB shares tumbled as much as 5% on Friday.
The report said Lone Star sold 87.7 million shares in South Korea's No. 5 bank at 13,600 won per share, a 6.8% discount to its closing price on Thursday. The source, who declined to be named.
The offer was increased from the initially planned 73.1 million shares, the source said, with demand far exceeding availability.
The stake was sold near the top of a range of 13,150 won to 13,750 won a share, according to a source, raising 1.19 trillion won ($1.28 billion).
Hana Financial Group said it participated in the deal, buying a less than 1% stake.
Credit Suisse was the sole bookrunner for the deal.
The sale not only enables Lone Star, which is facing a legal battle over KEB, to cash in part of investment gains, but also could help find a buyer for KEB's controlling stake more easily in the future, analysts said.
Lone Star saw its $7.3 billion agreement to sell KEB to the country's biggest lender, Kookmin Bank, aborted last November due to a legal dispute over the U.S. fund's $1.2 billion purchase of KEB in 2003.
Lone Star is also in the process of selling South Korean construction firm Kukdong Engineering and Construction and leasing firm StarLease. The block sale leaves the Dallas-based fund with 53.3% of KEB, one of the few remaining targets for foreign investors seeking growth in South Korea's banking sector.
KEB shares rose 13.6% so far this year, although slower than the benchmark KOSPI's 25.1% gain.
Lone Star Divests Other Assets
Lone Star also appeared to have sold its stake in Kukdong Engineering & Construction. In a filing made Korea's Woongjin Holdings, it said it would buy 26.27 million shares in Kukdong for $712 million.
The private equity group has been cashing in on some of its investments in South Korea, with further plans to selloff leasing firm STARLease as early as Friday, the Reuters report said.