February 24, 2004
The New Imperialism: How it Works
The Carlyle Group is an investment bank headquartered in Washington, D.C. and it employs political fixers like George H.W. Bush, James Baker III, Frank C. Carlucci, and John Major (ex British Conservative PM) to help it run its business.
In the recent past, when South Korea was in a fiscal crisis, it was bailed out by the IMF with a loan guaranteed by the US. One of the conditions of the bailout was that South Korean law on the ownership of banks had to be changed to permit foreign ownership. The operative principle was "Free Trade". Purely altruistic. Thereafter Carlyle bought the South Korean bank, KorAm.
One might infer that the value of a capitalist-owned South Korean bank might be inversely related to the probability of a re-unification of the two Koreas, one Communist and the other Capitalist. Until two years ago, the public opinion climate in South Korea for such a move was improving steadily. That move was vetoed by the second Bush regime and George W. named North Korea to his "Axis of Evil" and created a nuclear crisis in northeast Asia. The probability of a unification of the two Koreas went into a graveyard spiral and the value of Carlyle's investment in KorAm more than doubled. The profit was realized when Carlyle sold KorAm to Citicorp for $2.7 billion.
Of course that's not a version of events that can be acknowledged. The version George W. reads from his teleprompter and that is repeated ad nauseum by our fearlessly independent media from the NY Times to the National Enquirer is that reclusive, inscrutible, prudish, untrustworthy, and compulsively isolationist North Korea, led by an eccentric hermit who is not above starving his own people, violated a solemn agreement (called the Agreed Framework) with the wholly trustworthy, peace-loving, and humanitarian United States. The American good Samaritan, having been kicked by this ungrateful Asian runt, has no choice but to get stern. And getting stern includes bombing him back to the stone age, not because we want to, but simply to fulfill our obligation to protect the peace and security of the freedom-loving people of the world from an evil, irrational man who might lash out with weapons of mass destruction at any time.
In the official scenario, the fact that bad North Korea's behavior happened to turn a handome profit for the Carlyle Group is purely fortuitous. The loyal, not to say slavish, press is mentally incapable of even mentioning Carlyle's good luck.
Dutch Television recently aired an informative documentary on the Carlyle Group. It's about 48 minutes long. The 2 minute introduction and a little piece toward the end are in Dutch. The rest is in English. If you have RealPlayer installed on your computer you can watch it. If not click here to get RealPlayer free.
I would suggest reading the Times' bland, clueless description of imperialism and then scrolling back up and clicking one of the buttons to watch the Carlyle Group documentary produced for Dutch TV.
In case you're curious, the English translation of the Dutch introduction is:
Otto, February 25, 2004
February 23, 2004
Citigroup Buys South Korean Bank for $2.7 BillionBy REUTERS
Filed at 3:17 a.m. ET
SEOUL (Reuters) - In the largest ever foreign investment in South Korea, Citigroup Inc said on Monday it would buy KorAm Bank for $2.7 billion to extend its push into emerging markets.
The world's largest financial services company beat out Standard Chartered Plc to buy South Korea's sixth-largest bank from a consortium led by U.S. private equity firm Carlyle Group and J.P. Morgan, which more than doubled its money on its investment.
New York-based Citigroup has not followed U.S. rivals such as Bank of America and J.P. Morgan in bulking up on consumer bank acquisitions in its domestic market. Instead, it said it's looking for growth in Asia's developing markets after already buying banks in Mexico and Poland.
``It's a large under-served market from our point of view. The Korean financial services market is only opening now,'' Deryck Maughan, chief executive of Citigroup International, told Reuters.
``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.''
Citigroup has been the most active U.S. bank in Asia, recently launching a credit card in China after taking a stake in a lender there. It has targeted Hong Kong, Singapore, India, Japan and Taiwan as growth markets and its Asian consumer banking has eclipsed that of U.S. rivals such as Bank of America.
Foreign banks can buy South Korea's banks cheaply as share prices have suffered in the fallout from a mountain of unpaid credit card debt.
Lone Star, a U.S. equity firm, bought a controlling stake in Korea Exchange Bank for $1.2 billion last year, until then the largest foreign takeover in Asia's fourth-biggest economy.
IMMEDIATE EARNINGS BOOST
The acquisition is likely to help Koram compete with rivals such as the country's largest lender, Kookmin Bank, and Shinhan Financial Group, analysts said.
Citigroup, which started 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.
Citigroup's overseas profits rose 18 percent to $4.9 billion in 2003, or 27.5 percent of total earnings. The bank's Asia-ex Japan operations brought in $1.8 billion, up 14 percent.
Citigroup will buy the U.S. consortium's 36.6 percent KorAm stake and tender for the remaining shares at 15,500 won per share in cash, totaling 3.18 trillion won ($2.7 billion). The consortium got a return of 2.3 times its original KorAm investment of $430 million in 2000.
The price represented a 6.7 percent premium over the average closing price of KorAm's stock for the last 30 trading days, but was slightly below Friday's close of 15,800 won.
KorAm shares fell 5.1 percent to close at 15,000 won in a flat market. The shares have risen 43 percent in the last six months, beating a 19 percent gain in the main index.
``I think the price offered is appropriate, but the shares are under pressure as they had been driven higher on expectations that the deal would be announced soon,'' said Oh Sung-min, a fund manager at Seoul Investment Trust and Management.
RIVAL SEEN SELLING
Citigroup will also seek to buy Standard Chartered's 9.8 percent stake in KorAm. ``We would be hopeful they would submit their shares as part of the tender,'' said Citigroup's Maughan.
Officials at Standard Chartered declined to comment.
``I would imagine somewhere along the line they would probably have to sell that stake out,'' said Anthony Lok, an analyst at BOC International in Hong Kong. ``It doesn't really change their strategy,'' he said, noting Standard Chartered could look at another takeover candidate in Korea.
The banks will start the tender as soon as they get regulatory approvals and expected to close the deal in the second quarter. Labour unions said they would oppose the deal, following similar opposition to Shinhan's 3.4 trillion won takeover of Chohung Bank last year.
KorAm has assets of 43 trillion won, 222 domestic branches, more than six million customers, 3.3 million card accounts, and a market share of 7.6 percent based on revenue. Citigroup Korea has local assets of 10.4 trillion won, revenues of 355 billion won and 12 consumer branches with 799 staff.
KorAm swung to a 12.9 billion won net loss in the quarter ended December, hit by higher provisioning against credit card loans and its exposure to ailing LG Card Co.