U.S. private equity fund Lone Star confirmed on Tuesday it is in exclusive negotiations with HSBC to sell its 51% stake in Korea Exchange Bank (KEB), with a market value of $4.8 billion.
The confirmation comes a day after HSBC said it was in talks to buy a majority stake in KEB, a move that could flush out domestic counterbidders, including top South Korean bank Kookmin.
"The discussions are timely ... it is now time for Lone Star to sell its share to a strategic investor which can bring the bank to a new level of competitiveness," Lone Star chairman John Grayken said in an e-mailed statement.
An industry source expects Lone Star to sign a preliminary agreement with the London-based bank soon, which allows both sides to continue exclusive talks for 90 days prior to sealing a final deal.
The U.S. private equity house's legal battle in South Korea over its $1.2 billion purchase of KEB in 2003 has delayed the bank's sale. Lone Star cancelled a $7.3 billion offer from Kookmin to buy 71% of KEB last year.
It also ended talks with Singapore's DBS Group Holdings earlier this year, and the largest bank in Southeast Asia hinted at legal issues in explaining why it walked away from KEB.
But Lone Star and financial regulatory officials have said there are no legal obstacles keeping the fund from cashing out of KEB, only political ones.
Recent state-run asset sales have gone to local companies after a public backlash against foreign firms that have racked up heavy capital gains by snapping up distressed domestic companies.
The industry source said HSBC may be trying to test regulators' reaction by leaking the news of its talks with Lone Star, before it enters into a contract.