The Financial Services Commission [FSC], South Korean government’s top financial regulator said Tuesday, according to Dow Jones Newswire, that talks between Korea Development Bank [KDB] and Lehman Brothers Holdings Inc. (LEH) have ended.
The FSC Chairman Mr. Jun Kwang-woo, who overseas KDB’s operations and who has been in favor of KDB pursuing an expansion strategy, seems to have turned more cautious in his business considerations for the 158-year-old NY based investment bank.
On Tuesday, Mr. Jun, after cautioning one day earlier against KDB’s plan to buy a stake in Lehman as the timing wasn’t good — told DJ Newswires that the talks were now over between KDB and Lehman. “There will be other opportunities (for KDB),” Jun said. Separately, another government official, notes DJ – declining to be named, stated that although KDB had seriously considered investing in the U.S. firm, it has decided not to.
Last month KDB officials met with Lehman’s management in New York to discuss buying a stake of up to 50% of the investment bank. Talks however stalled after KDB team reached the conclusion that Lehman was asking for too high a price. Then last week – according to Korea daily Chosun Ilbo, KDB sent a proposal for a 25% stake in the U.S. firm for as much as $5.3 billion. The proposal was structured toward a consortium of major South Korean financial institutions to jointly invest in Lehman. But all private investors refused joining the consortium, saying they weren’t interested to invest in Lehman due to economic uncertainties on the local front.
Today’s abrupt end of the negotiations comes as Lehman’s management finds itself under increasing pressure to raise more capital before the co. reports earnings later next week. The news also prompted Lehman Brothers shares to lose more than one-third of their value in the U.S., reaching the lowest level in nearly 10 years on uncertainty about the bank’s ability to sell its asset management business and raise needed capital.
On a separate note: A conflicting Reuters report notes that Korea Financial Services Commission spokesperson said its Chairman never made declarations indicating talks had ended. Certainly these conflicting reports are confusing, but at the same time contradictory attributes are nothing new to Lehman Brothers. The co. for several months now has been subject of much speculation and rumor regarding the state of its discussions with potential investors and asset sales.