The prosecution's investigation and the Board of Audit and Inspection's audit into whether there were illegalities committed in the process of Korea Exchange Bank's (KEB) sale to Lone Star are both building stronger cases, making it increasingly possible that Lone Star's acquisition of KEB shares could be found invalid. It makes you really wonder what would happen if it were found invalid only after Lone Star sells its stake in KEB and is off on its way.
BAI and the prosecution are digging into whether KEB's capital adequacy ratio was deliberately falsified. It is too early to draw any conclusions, and every turn of plot is a possibility. By the same reasoning you see in the statements by those involved that KEB's capital adequacy ratio was set at 6.16 percent back in 2003 because of a pessimistic scenario, there exists the slight but extreme possibility that officials in the government and executives at KEB and Lone Star conspired to make the sale happen. Were that to be the case, you might see the sale annulled.
However, the possibilities are all too out of pace with the effort and timetable for Lone Star's sale of KEB. The initial survey being performed by Kookmin Bank, which has been officially selected as the first potential buyer, will be completed by early next month. At that point it is supposed to sign a full contract with Lone Star. According to a prosecution official, meanwhile, the investigation will not be over until July. If there is an annulment fight in court, it will take far longer for that to be concluded. If Lone Star does what they call "take the money and run," it will be like trying to flag down a bus that has already departed.
One way to go about it would be for the Financial Supervisory Commission (FSC) and the Fair Trade Commission (FTC) to temporarily withhold approval of the deal with Kookmin, but it would be hard for the government to change its stance on a sale it once approved. Resolving the issue at an earlier phase in the process would be the more reasonable course of action, namely by Kookmin being the one to decide to wait on acquiring KEB until the audit and investigation are over. Kookmin has 25 million customers. If it disregards public opinion it could leave the people and its customers with an incurable sense of betrayal. It is entirely possible to assume that would be a significant burden for Kookmin's management.
We understand how it is morally hard to unilaterally discontinue negotiations on a commercial transaction. Kookmin says it does not have the justification for doing so, but we believe there is a new variable in effect that would allow it to. The invalidation of Lone Star's acquisition of its stake in KEB would mean it is unqualified to sell it. If that uncertainty is not justification for Kookmin to take a step back, to the public that will only look like Kookmin is saying it just wants to be a bigger bank. Whether it publicly declares it is suspending negotiations or whether it does so in just a substantial way is something for Kookmin to determine. On Thursday KEB's union ran newspaper advertisements in which it openly asked whether the country's largest bank needs to be exclusively helping Lone Star make money. KEB's union certainly has its own interests involved, but Kookmin should not take the matter lightly.
The Hankyoreh, 14 April 2006.
[Translations by Seoul Selection]
[Editorial] Kookmin Should Suspend Negotiations On Acquiring KEB |
