The Paris-based bank bought 20.1 million shares worth W937.8 billion ($983.7 million) based on Monday's closing price of W46,600 per share. That brings BNP ParibasÆs stake up to 9.4%. The deal price represents a multiple of approximately 10 times 2006 net income and 1.9 times book value, according to BNP Paribas.
After the market closed on Monday, the state agency Korea Deposit Insurance Corp (KDIC) sold 90% of its 22.36 million shares in Shinhan to FranceÆs BNP Paribas. The remainder was sold to other investors via block deals before the market opened on Tuesday.
UBS AG and Korea Investment & Securities Co. arranged the sales.
In 2003, Shinhan took over Chohung Bank and to finance that acquisition Shinhan sold convertible bonds to KDIC. In November, KDIC converted half of the bonds, giving it a 6.2% stake in Shinhan, which it just sold.
KDIC also owns redeemable preferred stock in Shinhan, which it can convert in August. Analysts interpret this to mean more shares will be on offer this summer.
"We were able to maximise our returns by selling a 90% stake to BNP Paribas, Shinhan's strategic investor, without discount," according to a statement from KDIC, indicating the state agency views the French bank favourably.
Before this acquisition, BNP Paribas held 3.77% of Shinhan Group's share capital. It had acquired most of this since 2001 when the Korean Group was created and listed on the stock exchange.
BNP Paribas and Shinhan have been operating joint ventures within insurance and asset management in South Korea and BNP's Korea country manager, Philippe Reynieix, is one of Shinhan's outside board members, indicating the two banks have a friendly relationship.
Last month Kookmin Bank was announced as the preferred bidder to take over Korea Exchange Bank, a move that if approved will create the nation's biggest lender. Kookmin beat out, among other contenders, SingaporeÆs DBS Group.
ôThis deal indicates that if the right foreign players offer to increase their investments, Korean banks will be interested,ö says one Korean FIG specialist.