SEOUL (AFP) — South Korean banks led by Korea Development Bank (KDB) have shelved plans to buy a stake and management rights in Lehman Brothers due to concerns about its financial health, a report said Friday.
The state-run KDB and other banks were in talks with the major US investment bank until early August but negotiations failed at the final stage, the Chosun Ilbo newspaper said.
It said Lehman executives visited Seoul in June and initially sounded out the Korea Investment Corp. (KIC), a sovereign wealth fund which had earlier invested two billion dollars in Merrill Lynch.
After KIC decided not to proceed, the paper said, Lehman approached KDB chief Min Euoo-Sung, who had headed Lehman's local branch for three years until early this year.
Min initially pushed for the deal in cooperation with other local banks but backed out because the proposed takeover price was 50 percent higher than Lehman's book value, the daily said.
Problems with the accounts were more serious than initially believed, an unidentified government official was quoted as saying. "We concluded that it was too risky for KDB to take the deal."
Lehman Brothers has suffered billions of dollars in writedowns and credit losses after the financial crisis triggered by the meltdown in the US subprime mortgage sector.
Its shares are now at their lowest level since it went public in 1994.
KDB, which was set up in 1954 to finance the nation's industrial and economic development, refused to confirm the newspaper report.
The government hopes to privatise it by 2012 and turn it into a global player by allowing it to acquire other financial companies.
"We believed that if we bought a world-renowned financial firm for 7-8 trillion won (7.4-8.4 billion dollars), it would provide important momentum for Korea's financial industry to go global," a local bank executive told Chosun.
The paper said KDB or other local banks may still resurrect their bids.
It quoted Min as saying it was "normal that several negotiations and ruptures occur before a takeover deal is successfully completed. In the current circumstances, we can't put all our cards on the table."
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