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UPDATE 1-Lone Star proposes MBK buy 25 pct of KEB -report

Published 10/11/2010, 09:22 PM
Updated 10/11/2010, 09:24 PM

* Lone Star in separate KEB deal talks with MBK -report

* MBK finishes due diligence on KEB -report

* MBK, ANZ offered 13,000-15,000 won/share for KEB -report

* KEB shares up 2.2 pct vs flat KOSPI

(Adds details)

SEOUL, Oct 12 (Reuters) - U.S. private equity firm Lone Star has proposed that buyout fund MBK Partners purchase a 25 percent stake in Korea Exchange Bank to drum up investor interest in a 57 percent stake in the South Korean bank, a report said.

Australia and New Zealand Banking Group is the only bidder so far to publicly express an interest in KEB, and it has yet to complete due diligence for the stake worth about $4.5 billion at current market value.

Lone Star, which has been trying to sell KEB for at least four years, is holding a separate sales negotiation with MBK Partners to sell a portion of its stake in case its deal with ANZ collapses, the MoneyToday online media outlet reported on Tuesday, quoting sources close to the KEB deal.

The report said MBK had completed due diligence on KEB in August and both MBK and ANZ were offering between 13,000 and 15,000 won per KEB share. KEB shares are trading at 13,800 won on Tuesday, up 2.2 percent.

Lone Star, however, favours a deal with ANZ, because it has yet to receive funding plans from MBK and because South Korean regulators may disapprove a buyout fund as a top shareholder of a local lender, the report said.

The U.S. fund is enlisting MBK to press Australia's No. 4 bank to make a more competitive bid, it said.

ANZ began due diligence in mid-August on KEB and sources have said the bank is expected to decide by mid-October whether to bid for a 57 percent stake.

"There is no response other than what we have already disclosed to the market. Due diligence continues," an ANZ spokesman said.

MBK Partners was not available for comment.

Credit Suisse Group AG, which advises Lone Star, also was not available for comment. (Reporting by Miyoung Kim; Additional reporting by Michael Smith in SYDNEY; Editing by Ken Wills)

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