Hana Financial raises equity to fund KEB acquisition

Hana Financial, the parent company of Hana Bank, on Thursday last week priced its earlier announced share placement to raise the remaining funds needed to pay for its acquisition of Lone Star's 51% stake in Korea Exchange Bank (KEB).

The price was fixed at W42,800 per shares and the company sold 32.6 million shares for a total deal size of W1.4 trillion ($1.28 billion), making it the largest primary share follow-on in Asia ex-Japan so far this year. The price represented a discount of 5.5% versus the three-day volume-weighted average price to Wednesday last week and a 4.9% discount to Wednesday’s close. The price was slightly higher than the W42,000 per share that was indicated when the deal was first announced on February 10, which was a direct result of the fact that the share price rose 5.9% during the three days that were to make up the reference price.

To stick with the flagged deal size of about W1.4 trillion, Hana Financial sold slightly fewer shares than initially announced, namely 32.6 million, which correspond to about 13% of the enlarged share capital and about 15 days worth of trading. The company initially said it would sell up to 34.1 million shares, to give it some flexibility in case the share price would drop between the announcement and the pricing.

As per Korean regulations, a preliminary price, a maximum number of shares on sale, and even a group of buyers have to be announced publicly before the board of directors can approve the sale, and hence an announcement was made on February 10. All the terms can be changed during the actual bookbuilding, except for the investor names. Investors on the list are allowed to drop out, but new names cannot be added after the initial announcement.

Hana initially said it had rounded up a group of 37 investors and, of those, two dropped out because they didn’t want to pay more than W42,000. The final buyers comprised global long-only funds and hedge funds as well as some big Korean investors, including Morgan Stanley Investment Management, Credit Suisse Principal Strategies, Schroder Investment Management, Prudential Asset Management, and Och-Ziff Capital Management.