Standard Chartered trumped its bigger British rival HSBC by clinching a $3.3bn (£1.8bn) all-cash deal to buy Korea First Bank and yesterday raised £1.085bn through a share placing to help fund the acquisition, its largest ever.
Standard Chartered hired Cazenove and UBS to manage the placing of 117.9 million shares at 920p each. Standard Chartered shares closed down 24.5p at 928.5p.
The London-listed bank, which draws two-thirds of its profits from Asia, is buying the seventh-largest South Korean lender from the US venture capital group Newbridge Capital and the South Korean government. Until Christmas, HSBC was seen as the frontrunner and Standard Chartered even suggested last month that it might pull out of the bid battle.
Mervyn Davies, its chief executive, indicated the battle had been fierce, saying: "The bid went right to the wire. I wasn't confident we were going to win it until the very last minute. We put a huge amount of manpower in it over Christmas."
Analysts said that while the price looked high, Standard Chartered had been outbid by Citigroup for South Korea's sixth-largest lender KorAm Bank last April and needed to prove it still had the fire power to expand by acquisition in its key Asian markets. Simon Maughan, at Dresdner Kleinwort Wasserstein, said: "The cost of not doing this, being unable to penetrate north Asia and to win the bid, would have been too much for them to bear. The price is more reflective of the long-term strategic value of being in Korea and expanding in Asia."
The acquisition of Korea First, which with 3.3 million retail customers controls 6 per cent of the market, puts Standard Chartered head to head with Citigroup with an 8 per cent slice of the market through KorAm. Mr Davies is keen to tap into the fast-growing wealth management market and to cross-sell other products to mortgage and credit card customers, as well as boosting services to small businesses.
Mr Davies said that, at 1.87 times book value, Korea First was cheaper than Citigroup's £2.7bn KorAm deal. He also predicted pre-tax profits of at least $2.1bn for the group in 2004.Reuse content