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Citigroup to Acquire Bank in S. Korea

From Reuters

Citigroup Inc. said today that it would buy South Korea’s Koram Bank for $2.7 billion, extending the U.S. bank’s push into emerging markets in the largest foreign investment in Asia’s fourth-largest economy.

Citigroup beat out British banking group Standard Chartered to buy South Korea’s sixth-largest bank from the stock market and from a consortium led by U.S. private equity fund Carlyle Group.

New York-based Citigroup, the world’s largest financial services company, is looking for further growth in Asia’s developing markets after buying banks in Mexico and Poland.

“It’s a large underserved market from our point of view. The Korean financial services market is only opening now,” Deryck Maughan, chief executive of Citigroup International, told Reuters.

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“There are a whole series of markets ... that are now opening to foreign direct investment. What we have accomplished in Mexico with Banamex or Poland with Handlowy we feel we can accomplish in a number of Asian countries,” he added.

Foreign banks can buy South Korea’s banks cheaply because share prices have suffered in the fallout from a mountain of unpaid credit card debt.

The proposed acquisition is likely to help Koram compete with bigger rivals, including the country’s largest lender, Kookmin Bank, and Shinhan Financial Group, analysts said.

Citigroup, which was one of the first foreign banks to establish a presence in South Korea in 1967, expects the transaction to add to 2004 earnings. The bank earned a record $17.9 billion last year, mostly on its domestic consumer lending.

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Citigroup’s overseas profits rose 18% to $4.9 billion in 2003, or 27.5% of total earnings.

The terms of the transaction include the acquisition of the U.S. consortium’s 36.6% stake in Koram and a tender offer for the remaining shares, for a total of $2.7 billion.

The price represented a 6.7% premium over the average closing price of Koram’s stock for the last 30 trading days.


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