MBK seeks takeover of partial KEB stake

Deal between MBK and Lone Star relies on what ANZ plans to do. 

Asian private equity fund MBK Partners is in discussions with Lone Star Funds to buy around half of the stake owned by the U.S.-based fund in Korea Exchange Bank, instead of all of the U.S. fund's majority share, at prevailing market prices, a person familiar with the situation said Tuesday.

Whether a deal between Lone Star and MBK Partners materializes may be contingent on what Australia & New Zealand Banking Group Ltd., which is conducting due diligence for a 57.27% stake in KEB, decides to do, the person said, adding another twist to sale process that has dragged on for over half a year.

ANZ, which confirmed its interest in KEB in April, but has yet to decide whether to bid, is conducting due diligence for Lone Star's entire stake in the Korean bank as well as The Export-Import Bank of Korea's 6.25% stake.

The person Tuesday said MBK Partners' offer to buy around a 25% to 26% stake in KEB is close to the market value of the South Korean bank's shares, which is around KRW2.16 trillion to KRW2.25 trillion ($1.91 billion-$1.99 billion) based on Tuesday's closing price of KRW13,400 per share. MBK initially sought to buy all of Lone Star's KEB stake, but the person said it had been unable to raise enough funds for such a transaction.

KEB's shares underperformed its sector peers during Tuesday's trade because of uncertainties about whether a deal will be completed and expectations that Lone Star will not be able to command a strong premium for its stake in the South Korean bank--the country's eighth-largest bank by assets.

View the full report in the Wall Street Journal.