Here is the story this evening from the Korean news agency Chosun Ilbo. Make sure you check out the second story from The Economic Times of India in which the other Korean banks deny all knowledge of the deal most emphatically.
Lehman closed today with a market cap of $11.20 Billion. If the Korean government approve the deal, KDB seems to be valuing Lehman at about $20-24 Billion which is a handsome premium. If this is the offer that Lehman management considers too low then we'd be a bit surprised.
There is an earlier report in Reuters that HSBC has expressed an interest in Lehman citing sources at ... you guessed it, Chosun Ilbo.
Curiouser and curiouser. A Wall Street bond trader of our acquaintance has suggested that Hank made some princely gestures vis à vis Korea's huge holdings of Fannie and Freddie in return for some sugar on the Lehman problem.
Our own take is that someone is trying to push this deal through their government bureaucracy via the media and is starting to make Jim Cramer of Mad Money look like James Pierpont Morgan.
Let's see what happens and what the details might be. We remain guardedly agnostic.
Korean Banks Consider Bidding For Lehman Brothers
Chosun Ilbo (English Edition)
Sep.3,2008 06:58 KST
Banks such as the Woori and Shinhan Financial Group are taking keen interest in joining a consortium the Korea Development Bank is trying to form to jointly buy Lehman Brothers, the U.S.’ fourth largest investment bank.
A financial industry insider said Tuesday that KDB sent to Lehman a proposal expressing its intention to buy 25 percent of the U.S. bank’s shares for Won 5-6 trillion (US$1=W1,134) and is now awaiting the answer.
Woori and Shinhan reportedly discussed joining the consortium with KDB with the condition that they acquire a comparable amount of Lehman’s stocks to KDB. This raises the likelihood of a Korean bank acquiring a global investment bank for the first time -- if the government does not oppose its bid and Lehman accepts the proposal, whose proposal reportedly includes a term that guarantees a priority right of KDB, so that it can increase its stake in the U.S. bank from 25 to 49 percent.
KDB sent offer to Lehman, Korean banks deny role
3 Sep, 2008, 0848 hrs IST
The Economic Times of India
SEOUL: (Reuters) State-controlled Korea Development Bank (KDB) proposed buying 25 per cent of US bank Lehman Brothers for up to $5.3 billion, media reported, but Korean banks rumoured to be joining a bid consortium denied they were involved.
Media reported on Wednesday that KDB had sent the proposal to the troubled US bank and that leading local banking groups Woori Finance Holdings and Shinhan Financial Group were seriously considering joining. Shinhan and Woori, whose shares were hit hard on Tuesday on concerns about the extent of Lehman's problems and their potential exposure, were quick to deny the media's report.
"We have not seriously considered the idea and have no plans to do so in the future," said a spokesman at Shinhan, South Korea's second-biggest financial services firm. Third-ranked Woori Finance also said in a statement: "We have not received any offer about the Lehman deal nor have we considered it internally."
The smaller Hana Financial Group reiterated its previous denial, while KDB declined comment on the report. KDB confirmed on Tuesday it was in talks with Lehman over a possible joint investment in the bank with other Korean banks, but declined to give details of its negotiations.
The Chosun report also quoted an unnamed financial industry source as saying top European bank HSBC Holdings, several US hedge funds and an unidentified Chinese bank were among other potential buyers of Lehman. HSBC officials in Hong Kong and Seoul declined to comment.
Lehman prefers KDB, whose CEO used to head the US bank's South Korean operations, over other contenders as KDB plans to keep its current management after an acquisition, but the deal may fall through as KDB's bid price is considered very low, the paper said.
According to the report, KDB was offering 5-6 trillion won ($4.4-5.3 billion) for 25 per cent of Lehman and also wants a guarantee it can later increase its stake to 40-50 per cent. South Korean authorities have publicly said they are against the state-controlled bank playing more than the role of a catalyst in any purchase of Lehman, preferring private banks to take the lead.
Lehman, which has more than $60 billion of mortgage and mortgage security exposure, is under pressure to raise capital as Wall Street firms continue to reel from the fallout of the subprime mortgage crisis. The fourth-largest US investment bank is looking for buyers for some $40 billion of commercial mortgages and property on its balance sheet.
By 0224 GMT, Woori shares had rebounded to trade 2 per cent higher, while Shinhan was off 2 per cent. Hana Financial dropped 3.2 per cent. The broader Korean share index was up 0.8 per cent.
