Korea Development Bank CEO and former Lehman Seoul branch manager Min Euoo Sung confirmed that talks with Lehman about a possible investment are still continuing. Note that Min has been the driving force behind the deal; the stumbling block appears to have been getting official approval. With talks apparently fairly serious, it would seem some official impediments have been cleared. However, a Bloomberg story quotes an unnamed government source says that no application to invest in Lehman has been made. That may not be a sign that something is amiss; an application probably requires a price and a deal structure. But one would think that preliminary talks with the relevant agencies would be in order, and there is no indication as to whether they are underway.
Failure to cinch a deal with KDB, or a KDB-led group would be a serious blow, since it would suggest either that Lehman’s price expectations were unrealistic, that KDB made some due diligence discoveries that changed its view or valuation, or that Lehman would not give the reps and warranties that KDB sought. The next best course of action, selling all or part of its asset management group, is a sign of desperation, since that is Lehman’s best remaining asset.
From Bloomberg:
Korea Development Bank is in talks to buy a stake in Lehman Brothers Holdings Inc., the fourth-biggest U.S. securities firm…..
Korea Development may team with a domestic lender, probably Woori Finance Holdings or Co. Hana Financial Group Inc., to buy a stake in Lehman, Dong-a Ilbo reported today, citing financial officials that it didn’t identify.
Lee Jung Dae, a spokesman for Seoul-based Hana, said the company has no plans to join a bid for a stake in Lehman. Woori spokesman Lee Won Chuel said his firm hasn’t received any offer from Korea Development Bank or any other party to partner in buying a stake.
“I don’t think KDB will secure enough local partners when there are other M&A targets in the home banking sector,” said Shim Jae Duk, oversees the equivalent of $800 million as head of equities at Hyundai Wise Asset…
A government official, speaking on condition of anonymity because he isn’t allowed to publicly discuss the matter, has said the financial regulator has yet to receive an application from Korea Development for permission to invest in Lehman.
Jun Kwang Woo, chairman of South Korea’s Financial Services Commission, on Aug. 25 warned of risks of buying overseas banks, saying it wasn’t appropriate for state-run banks like Korea Development to lead such efforts…..
Korea Development is set to be privatized, with the government planning to sell a 49 percent stake in a holding company to be set up for KDB and its three affiliates by 2010. The remaining 51 percent would be sold by 2012.
13 comments
Comments are closed.
Enough already. Lehman is like Gollum at the end of Lord of the Rings. Flailing and holding on to it’s precious assssseetssss as it sinks in the lava.
Let’s talk about the end game, please. At least 80% of the investment banking world has no faith in their reporting or ability to exist as an independent entity. So how can they be unwound or just euthanized without increasing systemic risk? Ginger, Yves, please chime in on these more meaning for topics for us readers. This KDB release is tabloid stuff too me.
So somebody inside KDB leaks the info. Why? If they’re on the buy side, they want the price to go lower.
And a gov’t official tells us that the deal is nonsense (inasmuch as Korean social rules would allow).
Very strange story indeed. Looks to me like somebody has a load of LEH stock that they need to unload.
Or former Lehman exec now at the helm of KDB is doing his old buddies a favor by making it look like there might be a bid….or maybe he believes he can somehow muscle this one through, despite indications otherwise. Koreans are pretty rough and tumble, unlike the Japanese.
This and earlier stories said that KDB has engaged Perella Weinberg, so they have spent hard dollars. They are beyond the idle chatter stage.
FYI: Old, but of interest:
Korean newspapers report that the New York-based brokerage firm first approached sovereign wealth fund Korean Investment Corp. But KDB apparently wasn’t upset by the snub, perhaps because of some personal ties to Lehman: Its chief executive, Min Euoo-Sung, was the head of Lehman’s Korean operations for three years before taking over at KDB last year.
Lehman’s clock is ticking
http://money.cnn.com/2008/08/22/magazines/fortune/lehman.sale.fortune/?postversion=2008082218
According to Bove, if a deal doesn’t materialize by Monday, then “Lehman is in play.” He suggested a stock price of around $20 might get a deal done. Given Lehman’s recent lows, and the memory of what happened to Bear Stearns earlier this year, that might not sound like a bad price.
** FIRST PUBLISHED: AUGUST 22, 2008: 1:37 PM EDT
The Telegraph also reported Sunday that Lehman’s talks with KDB have intensified in recent days with the aim of providing a capital injection of as much as $6 billion. KDB has hired bankers from the advisory boutique Perella Weinberg to offer counsel on the negotiations, which could wrap up as early as this week, the U.K. newspaper said on its Web site.
Yves, have you read this:
Lehman Brothers in urgent talks on capital injection
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/08/31/cnleh131.xml
If the talks with the Koreans fall through, Lehman is lining up alternative investment from other sources, including Citic Securities, a Chinese brokerage which was on the verge of investing in Bear Stearns before its implosion earlier this year, which resulted in a cut-price takeover by JP Morgan, another Wall Street banking group.
Beating the Lehman dead horse:
The Financial Times reported Wednesday that Lehman held talks earlier this month with Citic Securities and Korea Development Bank to sell 50% of its stock but failed to reach a deal.
“I don’t know anything about the reported talks”, Tan said. A media relations official for Lehman couldn’t immediately be reached for comment. Tan said Citic Securities will continue to be prudent in evaluating any investment opportunities overseas, especially given that the US market isn’t in good shape. In March, Citic Securities aborted plans for a $1bn (€675.7m) cross-investment with Bear Stearns after JP Morgan Chase’s deal to take over Bear. Citic and Bear had earlier agreed to invest in each other as part of a strategic tie-up in Asia, and Citic had expected to take about 6% of Bear.
Or former Lehman exec now at the helm of KDB is doing his old buddies a favor by making it look like there might be a bid…
Honestly, that is the best explanation I’ve heard so far. Nothing brings in buyers like the rumor that their competitors are interested.
JP,
This is a way to adjust the signal-to-noise ratio and offer some hype before the losses are reported; they must think this will maintain stability until then? maybe they should do a reverse split and then bump up the dividend?
Earlier post by Yves is great:
Re: MONDAY, OCTOBER 22, 2007
Mirabile Dictu: Bear Makes a Deal With Citic
Well, I thought no one would do a deal with Bear, at least not a strategic investor sort (taking a trading position is another matter entirely). But the government controlled Chinese entity Citic appears to have done just that.
>> Jimmy Cayne, Bear Stearns chief executive, said the opportunity to create an alliance with Citic was the most attractive deal he had come across in 40 years.
“It’s a giant step into the most exciting market in the world,” he told the Financial Times. He added that he did not expect significant regulatory problems given the relatively small size of the deal.
Under the proposed alliance, Citic Securities will acquire $1bn worth of securities that will convert into a shareholding of about 6 per cent in Bear Stearns over 40 years. The Chinese brokerage also has the option to raise its holding to 9.9 per cent.
LOL!
This is an interesting ‘deal’ with a lot of ups and downs. I’ve been in deals like this with a big guy pushing it against a lot of headwinds, chopping and slicing the deal as it rots on the vine. Maybe he will pull this off in some shape or form. Maybe it won’t finally matter at the end of the day.
The Artifice of the Deal, Part 2
http://jessescrossroadscafe.blogspot.com/2008/09/kdb-and-artifice-of-deal-part-2.html
If the previous article on a possible currency crisis in Korea has any validity, the Koreans are probably circling the wagons now. They’ll shy away from a risky deal like this, unless Lehman is willing to give itself away damn near free.
Re ” Lehman is willing to give itself away damn near free.”
Isnt that the point, i.e, Lehman is worthless?