SEOUL, South Korea (AP) - U.S. private equity group Lone Star Funds took a step closer Thursday to achieving its long-sought goal of selling its controlling stake in a once-troubled local lender as South Korea's fair trade watchdog approved the deal.
Lone Star agreed in November to sell its 51.02 percent stake in Korea Exchange Bank to South Korea's Hana Financial Group for 4.69 trillion won, or $4.2 billion at current exchange rates. Hana said at the time that the acquisition would make it South Korea's third-largest financial group by assets.
Dallas, Texas-based Lone Star took over Korea Exchange Bank in late 2003 when the lender was in financial trouble by purchasing a 51 percent stake for about 1.4 trillion won. The fund later increased its share to 64.62 percent but sold part of that in 2007.
Efforts to sell the entire stake and take profit, however, have been held up for years amid legal disputes related to the acquisition and critical media and public opinion regarding the activities of foreign buyout firms.
South Korea's Fair Trade Commission announced Thursday that it had given approval for the agreement with Hana Financial Group, saying it had judged that the deal would not limit competition.
The deal also requires approval from South Korea's financial regulator. Ernst Lee, a spokesman with the Financial Services Commission, said that there is a "high probability" it will make a ruling on March 16.
If the deal goes through, Lone Star would realize a tripling of its original investment.
Lone Star has long tried to offload its KEB stake, but reluctance by regulators to approve a deal while various court cases were pending had made carrying out a sale difficult.
The fund has consistently denied any wrongdoing related to the purchase of KEB and has argued its rehabilitation of the bank has been good for South Korea's economy.
Former officials from South Korea's Finance Ministry and KEB faced charges that they helped Lone Star buy the lender for a bargain price by conspiring to understate its value, though were found not guilty. Prosecutors appealed, but the verdicts were upheld.
In an example, however, of the legal ups and downs Lone Star has gone through, South Korea's Supreme Court on Thursday reversed a 2008 high court ruling that had acquitted a fund official over allegations of stock price manipulation and sent it back to the Seoul High Court, Yonhap news agency reported.