HSBC came a step closer to gaining control of Korea Exchange Bank (KEB) yesterday when it struck a deal with Lone Star, the Texas-based investment firm, to pay $6.3 billion (£3.1 billion) in cash for its 51 per cent stake.

With huge legal uncertainty surrounding ownership of South Korea’s sixth-largest bank, HSBC inserted a string of get-out clauses into the agreement so that it could extract itself should the need arise.

These include a 40-day due diligence period, during which HSBC can search for any hidden financial holes that might have been opened up by two months of turbulent conditions in the credit markets. There is also an agreement that HSBC can walk away from the acquisition if it fails to receive all relevant government and regulatory approvals by the end of April next year.

To smooth the process from Lone Star’s side, Europe’s largest bank by assets has agreed to sweeten the price by $133 million if the deal has not been approved by the end of January.

Steven Green, HSBC’s group chairman, told The Times that agreeing a price was a “milestone” on the path to a successful acquisition, although he acknowledged that there were hurdles to overcome.

“It’s a very fair price,” he said, noting that the amount agreed is 1.83 times KEB’s book value, 12 times historic earnings and a 21 per cent premium to the share price in recent days.

The agreed sale of the KEB stake comes just two weeks after it emerged that HSBC and Lone Star were in talks over the deal. It represents HSBC’s biggest chance yet of fulfilling its ambition to secure a big acquisition in Asia’s third-largest economy. It has had its eye on developing in the region for eight years.

HSBC has made little secret of its eagerness to enter the Korean banking market, particularly since its two main regional rivals – Standard Chartered and Citibank – have already secured presences there. When it bought Korea First Bank in 2005, Standard Chartered paid about half the amount that HSBC is paying for KEB.

Within hours of the agreement being unveiled, the Korean financial regulator aired its reservations, insisting that the purchase could not go ahead until a series of legal issues had been resolved.

Lone Star remains embroiled in a court wrangle over the legality of the original $1.3 billion purchase of its 65 per cent controlling stake in 2003.

Former government and KEB officials remain under official investigation over their role in signing off the price, which was agreed when the bank was close to bankruptcy.

Despite a $3 billion investment by Lone Star, the multibillion-dollar profits that it stands to make from a sale have sparked outrage in Korea. Analysts described the deal as “extremely difficult and still rife with potential pitfalls for HSBC”.

Mark Phin, at Keefe, Bruyette & Woods, said: “There are still significant regulatory hurdles to overcome, so the deal is not cast in stone, as yet. Overall, we can see the strategic rationale to the deal and it is small in the overall context of HSBC.”

HSBC said that if the deal was successful, it would retain the KEB brand and share listing on the Seoul Stock Exchange.

A spokesman for the Financial Supervisory Committee of Korea said: “It is difficult to approve the deal.”

Legal experts in Seoul believe that it is unlikely that Lone Star’s battle, which involves clearing itself of charges that it manipulated KEB’s stock price before the purchase, will be completed before January 31 next year. Lone Star and other foreign investors have pointed to the court case as an example of the difficulty of making big acquisitions in South Korea, which is seen by many as a hostile environment for foreign-led takeover bids of domestic firms.

Analysts said that the $6.3 billion price tag was “very fully priced” and represented the upper end of market expectations.

“This deal may be good for HSBC, but it is also very clearly good for Lone Star,” Jin Sang Kim, a banking analyst with Nomura Securities in Seoul, said.

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