Citigroup to buy KorAm for $2.7bn
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KorAm is the No. 6 commercial bank in the South Korean market.
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(CNN) -- Global financial giant Citigroup will buy South Korea's KorAm Bank for 3.18 trillion won ($2.73 billion), the two banks say.
The deal includes Citigroup buying a 36.6 percent stake in KorAm that is now held by a consortium led by U.S. investment fund the Carlyle Group.
Citigroup's winning bid for KorAm is something of a late run. Until earlier this month, Britain's Standard Chartered had been favored to take control of the Korean bank, in which it already held a 9.76 percent stake.
Temasek Holdings, the investment arm of the Singapore government, was also regarded as a potential bidder.
In a statement released Monday in Seoul and New York, Citigroup and KorAm said the price per share of 15,500 won represents a 6.7 percent premium over KorAm's average closing price for the last 30 trading days.
The two banks said Citigroup aimed to buy 36.6 percent from the consortium led by Carlyle and the investment partnership JP Morgan Corsair, plus at least another 43.4 percent on market, to give it a minimum 80 percent stake.
U.S. groups have been aggressive investors in the South Korean financial sector in recent years, with Texas investment fund Lone Star paying 1.383 trillion won ($1.16 billion) for a majority stake in the country's sixth largest lender Korea Exchange Bank (KEB) last year.
Goldman Sachs was an early entrant in Korea after the 1997 Asian financial crisis, paying $500 million to become the biggest shareholder in Kookmin Bank in 1999.
An attraction for overseas investors is the improved growth outlook for South Korea, which is Asia's fourth largest economy. It is tipped to grow about 4 percent this year after a lackluster 2003.
With 222 domestic branches, KorAm is the sixth largest commercial bank in South Korea and the seventh largest overall. It has assets of 43 trillion won ($36.8 billion).
It ranks behind Kookmin Bank, Shinhan Financial Group -- which took over Chohung Bank last year -- Woori Financial Group, and Hana Bank.
"Korea is a strategic priority for Citigroup," Citigroup International chairman and CEO Sir Deryck Maughan said in the statement Monday.
"The combination of KorAm and Citigroup will create a leading local bank with global capabilities."
Citigroup said it expects to close the deal by the end of June this year.
Shares in KorAm are down 4.4 percent to 15,100 won in Monday trade after the announcement.
The performance of Korean banks has been in the spotlight following problems with credit card affiliates -- a consequence of a credit squeeze early in 2003 by the government and scandals in the financial services sector.
Last month, South Korea's Financial Supervisory Service said bad loans at South Korean banks rose more than 22 percent in 2003 to about $15.6 billion, in part because of rising credit card defaults.
