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Citigroup buying South Korean bank

Under the deal, which would also be the first takeover of a domestic bank by a foreign bank, Citigroup aims to buy more than 80 percent of South Korea’s sixth-largest bank.
/ Source: Reuters

Citigroup said on Monday in Seoul that it would take over South Korea’s Koram Bank for $2.7 billion, including buying a stake held by the Carlyle Group, marking the biggest ever foreign investment in the country’s financial sector.

Under the deal, which would also be the first takeover of a domestic bank by a foreign bank, Citigroup aims to buy more than 80 percent of South Korea’s sixth-largest bank from a consortium led by U.S. private equity fund Carlyle and from the stock market.

“Korea is a strategic priority for Citigroup,” Deryck Maughan, chairman and chief executive officer of Citigroup International, said in a joint statement with Koram.

“The combination of Koram and Citigroup will create a leading local bank with global capabilities,” he said. “Together we will be able to better serve our clients and contribute to Korea’s growth and development.”

The terms of the transaction include the acquisition of the U.S. consortium’s 36.6 percent stake in Koram and a tender offer for up to 100 percent of the remaining shares at a price of 15,500 won per share in cash, totaling 3.18 trillion won ($2.73 billion).

The price per share represents a 6.7 percent premium over the average closing price of Koram stock on the Korea Stock Exchange for the last 30 trading days of 14,530 won, but was slightly lower than Friday’s close of 15,800 won.

The buyout offer sent shares in Koram down 4.8 percent to 15,050 won at 0043 GMT, while the broader market was 0.8 percent lower.

The tender offer will start as soon as all required regulatory approvals are received and the transaction is expected to close in the second quarter of 2004, the two banks said.

The proposed acquisition is likely to give Koram more firepower to compete with bigger local rivals, including the country’s biggest lender, Kookmin Bank, and Shinhan Financial Group, analysts said.

Koram ranks sixth among the country’s lenders by assets if Chohung Bank, which was taken over by Shinhan last year, is excluded. Koram has 222 domestic branches and total assets of 43 trillion won.