KEB move to raise $168m from Hana block dropped

Korea Exchange Bank aimed to sell 4.35 million shares in Hana Financial Group in a block trade.

Korea Exchange Bank’s (KEB) effort to sell 4.35 million shares in Hana Financial Group and raise $168 million in a block trade fell through on Wednesday night, according to a banker close to the deal.

Shares were initially offered between 40,937 won to 41,350 won ($38.23 to $38.62) when books opened, a tight zero to 1% discount to the last close of 41,340 won on March 5, according to a term sheet.

“It was decided not to proceed with the deal. There was enough demand to cover the book and the entire deal could have been allocated,” the banker told FinanceAsia on Thursday morning.  

“It's just that the allocations would have been a bit heavy and, on that basis, the stocks wouldn't have traded well in the aftermarket because the discount was so tight,” the banker added.

The banker said that KEB and Hana have a good relationship, so the aftermarket trading was important. “The deal will still happen. [But] the structure launched last night isn't proceeding.”

It was not clear when the deal could come to fruition, he added.

When bankers approached investors during the wall-cross process, they figured a 2% discount would be sufficient, but the 2% rise in the stock price from March 4 to March 5 “made it tricky”, a banker not on the deal told FinanceAsia.

“The issuer wanted a 0-1% discount, [especially] when they saw the stock price rise. They didn’t want 2%,” the banker said. “The whole market knew it was the wrong price. Sometimes the issuer gets [too] aggressive.”

KEB sold two-thirds of its stake in Hana Financial in a block sale in October and managed to raise $321 million in the process.

The October deal was covered more than one-and-a-half times and attracted 40 investors, with the price fixed at the bottom of the indicated range. KEB sold 8.4 million shares, which at the time represented 2.9% of Hana’s total issued share capital.

Hana Financial Group shares are down 8% so far this year.

The financial group, one of Korea's largest banks, reported earnings last week, with its fourth quarter net income plunging 56% to 171.7 billion won ($160.3 million) from 390.3 billion won ($364.5 million) in the third quarter.

Its 2013 net income meanwhile totalled 1.136 trillion won ($1.1 billion) compared to 1.15 trillion won ($1.07 billion) in 2012.

Citi and Morgan Stanley were joint bookrunners.

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