Kookmin, H&CB resume talks on merger

Kim Sang-Hoon, president of Kookmin Bank, and Kim Jung-Tae, president of Housing & Commercial Bank (H&CB), have begun negotiations to finalize the merger between the two banks. Under the mediation of the Financial Supervisory Commission, heads of the two bank held negotiations through midnight on Apr. 9 and continued talks on the next day to narrow their differences on the merger ratio and corporate existence.

If they fail to reach an agreement on Apr. 10, they will hold a news conference on Apr. 11 and announce their respective positions. Initially, the two banks agreed to accept the decision made by the merger-promotion committee. However, they have shown differences on the validity of the committee`s plan and began direct negotiations on the question of a bilateral merger.

Kim Byung-Joo, chairman of the committee, said the heads of the two banks needed to keep their word since they agreed to follow the committee`s decision. On Mar. 29, the committee agreed on a number of issues involving the two banks and six committee members signed the agreement. It specified the exchange rate of stocks at 1.6:1 and chose Kookmin Bank as the succeeding corporation. It decided to name a new president later.

As for the committee`s plan, Kookmin Bank noted that the merger ratio is something that was agreed among large shareholders of the two banks, saying that the committee is a decision-making body and that the agreement carries legal binding force since it was signed by the six committee members.

On the other hand, H&CB officials said they signed the agreement but that doesn`t mean that the bank will accept it, adding that the committee has no legal binding force. The bank claimed that the merger ratio should be at least 1.7:1.

Meanwhile, foreign investors launched a massive sell off of stocks in the two banks, driving their prices down. Foreign investors net sold 2.61 million shares of Kookmin Bank and 1.19 million shares of H&CB. As a result, Kookmin`s stock price slid to below 13,000 won and H&CB`s share price also dropped under 20,000 won for the first time since last May.

Hong Chan-Sun hcs@donga.com