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South Korea's Kookmin Bank to buy Kazakh bank stake for $634 mln

Business Materials 17 March 2008 09:01 (UTC +04:00)

( Reuter )- South Korea's Kookmin Bank said on Monday it would buy a 30 percent stake in Kazakhstan's CenterCredit CCBN.KZ for about $634 million, its first major cross-border acquisition in nearly half a decade.

Kookmin also said it would raise its holding to more than half of CenterCredit over the next few years.

South Korea's top bank has been trying to expand overseas and reduce its reliance on sluggish interest income at home.

Under the agreement, Kookmin will become the second-biggest shareholder in Kazakhstan's sixth-largest bank at a time when the Central Asian region is benefiting from ample natural resources such as oil, gas, uranium and gold.

But analysts remained sceptical about the acquisition's potential contribution to Kookmin's (KB.N: Quote, Profile, Research) earnings and questioned the price of the deal as the U.S. subprime mortgage meltdown has pummelled financial companies' valuations.

"Through the stake purchase, we will enter the CIS (Commonwealth of Independent States) region and will secure future growth momentum," Kookmin said in a filing. "After wrapping up the transaction, we will expand our shareholding to more than 50.1 percent within 30 months."

The acquisition is valued at about 621.3 billion won, or $634 million according to Kookmin's conversion, which includes buying new shares of CenterCredit.

The shares would be bought on the local stock exchange, but Kookmin gave no timeframe for completing the on-market transaction, which hinges on regulatory approval in both countries.

One banking source said Kookmin was being advised by a boutique firm in Kazakhstan and a signing ceremony for the stake purchase was scheduled for Tuesday in Kazakhstan.

Shares of Kookmin tumbled 5 percent to 53,200 won by 0219 GMT, versus the wider market's 3.34 percent fall on worsening credit worries after the surprise announcement on Sunday that the U.S. Federal Reserve lowered its discount rate.

Kookmin's acquisition price is slightly lower than CentreCredit's market price, but more than three times CentreCredit's book, according to Reuters calculations. That compared with Kookmin's book value of 1.25 times.

Other South Korean banks, including Shinhan Financial Group (055550.KS: Quote, Profile, Research) and Hana Financial Group (086790.KS: Quote, Profile, Research), have been opening overseas units in Asia, looking for new opportunities as they face stalled lending growth and stiff competition at home.

Domestic lenders earned less than 5 percent from overseas operations in 2007, according to regulatory data.

Kookmin, with a market value of $18 billion, had bought a controlling stake in Indonesia's sixth-largest lender, PT Bank Internasional Indonesia Tbk BNII.JK in a consortium, including Singapore fund Temasek, in 2003.

It said last week it could buy shares in Bank Internasional Indonesia (BII) from Singapore fund Temasek [TEM.UL], which would give it a controlling stake in the Indonesian lender.

Temasek, which has stakes in two Indonesian banks, is trying to sell its 42 percent share in BII to comply with a new central bank rule that prevents foreign investors from owning more than one bank in Southeast Asia's biggest economy. ($1=997.1 Won)

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