KB Financial Dismisses Rts Issue Underwriters-Sources

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South Korea's KB Financial Group (105560.SE) has dismissed four of six underwriters for its planned KRW2 trillion-KRW3 trillion ($1.6 billion-$2.3 billion) rights issue, four people familiar with the deal said Monday.

KB Financial has dismissed JP Morgan Chase & Co. (JPM), Bank of America Merrill Lynch, Citigroup Inc. (C) and Credit Suisse Group (CS) over new fee-related terms that the four investment banks raised, the people said. They were dismissed last week, two people said.

The South Korean company has hired in their place Morgan Stanley (MS) and Goldman Sachs Group Inc. (GS), the people said.

It has retained its underwriting mandates with two local firms: Samsung Securities Co. (016360.SE) and Korea Investment & Securities.

The four original foreign banks on the deal had initially offered to underwrite the deal for a fee of 0.6% of the proceeds of the KRW2 trillion-KRW3 trillion rights issue, well below the 2.5% charged by the banks that underwrote the KRW1.5 trillion rights issue by South Korea's Shinhan Financial Group (055550.SE) in February, one person said. He said that KB Financial dismissed the four banks when they sought to charge a higher fee later.

It wasn't immediately clear how much Goldman and Morgan Stanley are charging to underwrite the deal.

KB Financial will decide on whether to proceed with the rights issue at a board meeting next month.

If the plan is approved, KB Financial is expected to offer new shares in the early part of the third quarter, three of the people said.

An official at KB Financial said KB will use the proceeds for, among other things, mergers and acquisitions in non-banking businesses.

One person said that that could involve buying Korea Exchange Bank (004940.SE) from Dallas-based private equity firm Lone Star Funds, in a revival of a sale that has been plagued by mishaps. Alternatively, KB Financial could use the funds to expand its exposure to brokerages, the person said.

In November 2007, KB Financial, which wholly owns Kookmin Bank, South Korea's largest bank by assets, expanded beyond pure banking by buying Hannuri Investment & Securities Co.

Kookmin, Korea's largest retail bank by assets, had an agreement to buy a controlling stake in Korea Exchange Bank from Lone Star in 2006, but the deal was canceled amid a probe into circumstances under which the bank was sold to Lone Star.

Lone Star subsequently reached an agreement to sell the KEB stake to HSBC Holdings PLC (HBC), but the U.K. bank scrapped the sale last year amid turmoil in the global financial market.

Source: online.wsj.com