Hana Plans $1B Private Placement

SEOUL—South Korea’s Hana Financial Group Inc. said it aims to raise 1.2 trillion won ($1.05 billion) via a private placement of shares to help fund its 4.69 trillion won acquisition of a majority stake in Korea Exchange Bank.

Hana confirmed the arrangement in an exchange filing Monday after Chairman Kim Seung-yu disclosed the plan late Sunday. The company will issue a combination of convertible preference shares and ordinary shares by February, according to comments by Mr. Kim to local media that were confirmed by a Hana official.

Proceeds from the private placement will be a key component of the funding for Hana’s acquisition of a 51% stake in KEB, which is the largest deal on record for the Korean banking sector. The acquisition will significantly boost Hana’s operations, allowing it to overtake rival Shinhan Financial Group Co. as the third-largest financial holding company by assets in South Korea behind Woori Finance Holdings Co. and KB Financial Group Inc.

The executive said Hana will accept letters of intent from investors interested in an equity investment in the company by the end of this month, with an aim to sign a memorandum of understanding with new investors by Jan. 20. The investors will be revealed by end-January, he said, adding that the firm will try to minimize issuing ordinary shares in order to preserve existing shareholders’ positions as much as possible.

Mr. Kim said the firm seeks strategic, long-term investors and added that the firm would consider offers from private-equity funds if the terms are right. He declined to name any specific potential investors, but the executive said each investor will be able to acquire up to 9% of the company.

Analysts said any negatives from short-term dilution worries will be outweighed by how the KEB acquisition will strengthen Hana’s overall operations. They say the deal will marry Hana’s existing strength in retail and commercial banking with KEB’s dominant trade-finance and foreign-exchange businesses, helping the holding company round out its portfolio and strengthen its overall competitiveness.

Hana didn’t offer any financial details about the private placement. Under South Korean regulations, Hana can offer a discount of up to 10% for any shares being sold to a third party via a private placement.

Hana’s shares edged up 0.2% to 41,500 won, while KEB rose 4% to 11,600 won.

Mr. Kim said Sunday that Hana will use its internal funds for half of the acquisition price and will raise another 25% of the funds by issuing bonds. He also said Hana is pushing to close the deal as quickly as possible as the current contract for the shares with Lone Star Funds will raise the acquisition price by 100 won per share per month if the transaction isn’t completed by end-March.

Hana’s deal with Lone Star is currently priced at 14,250 won per KEB share.

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