South Korea's planned sale of part of its stakes in the Industrial Bank of Korea (IBK) fell apart recently, sources said Friday.

The government planned to sell about 23 million shares of its stake in the IBK through a block deal on Thursday in after-hours trading, according to the sources. The deal was estimated at around 300 billion won (US$290.3 million).

The government confirmed that the deal fell apart but did not elaborate on reasons. A finance ministry official told Yonhap that it was natural that a deal fails when conditions are not met.

The official said negotiations were still ongoing to rearrange the sale.

Market sources speculated that a legal issue may be the major reason, saying allegations that the IBK had violated sanctions on Iran prompted a U.S. bank to withdraw from the selling process. The ministry denied the speculation.

In May, there was a report that the IBK was reprimanded for illegal money transactions involving an account held by the Iranian central bank.

The lead managers for Thursday's block deal were JP Morgan, Merrill Lynch, Samsung Securities, and Korea Investment and Securities.

"A legal issue lingering over the IBK's violation of the sanctions might cause U.S. firms among the lead managers to be reluctant to join the sale," a source told Yonhap on condition of anonymity.

"One of the U.S. banks gave 'pending' opinions on the deal to the finance ministry yesterday which later had to decide to cancel its planned stake sale," he added.

The failure comes as the government plans to sell 586.2 billion won worth of its shares in the policy bank, which caters to small and medium-sized businesses, this year as part of efforts to raise money to meet its growing fiscal need.

The government said that it will continue to sell its stakes in the IBK and that there will be no problem in its future selling process. The failed deal, however, would have a negative impact on IBK shares, market observers said.

Shares of IBK closed at 13,150 won, down 3.66 percent from a day earlier versus 0.07 percent fall in benchmark KOSPI. (Yonhap)