Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Thematic (Sector/Industry)

<ul><li>We highlight 27 Korean companies that are seeking to find new owners through M&amp;A in 2016. Key sectors of M&amp;A in Korea in 2016 include <strong>financials, shipbuilding, and logistics.</strong>&nbsp;Our analysis is based on publicly available information.&nbsp;</li><li>To recap the M&amp;A market in Korea last year, 427 M&amp;A deals were struck in 2015 worth nearly US$65 billion. 2016 is likely to fare even better.&nbsp;</li><li>Korea Inc. is becoming less of an octopus and more of a shark. Korea is still dominated by the chaebols but several chaebols such as the Samsung Group are clearly trying to become more of a shark (greater focus on key industries such as tech) and less of an octopus, being diversified in so many different industries.</li><li>Korean companies' top&nbsp;300 largest companies by market capitalization had cash of about 128 trillion won at end of 2015, up&nbsp;33% YoY.&nbsp;</li><li>Among the various M&amp;A sectors in Korea in 2016, we find <strong>logistics</strong> and<strong> securities</strong> sectors to be quite interesting. In the logistics sector, <strong>Coupang</strong> (private company) is really revolutionizing the entire competitive structure of the industry. The companies that have been competing in this&nbsp;old, dull industry of packing products in boxes and delivering them must compete effectively against Coupang and catch up to them in terms of customer service, speed, and execution or else exit the industry.</li><li>In the <strong>securities sector</strong>, the recent acquisition of KDB Securities by Mirae Asset Securities, should lead to greater consolidation of this industry. In addition, despite the weak brokerage market, the <strong>IPO and M&amp;A</strong> markets in Korea should flourish this year, barring severe economic distress. The Korean government is also trying to accelerate the M&amp;A market in Korea this year.&nbsp;The Korean National Assembly passed the revisions to the Commercial Code in November 2015 (effective March 2016) which should help to facilitate companies&rsquo; restructuring and investment through M&amp;A.</li></ul>

We highlight 27 Korean companies that are seeking to find new owners through M&amp;A in 2016. Key sectors of M&amp;A in Korea in 2016 include financials, shipbuilding, and logistics.&nbsp;Our analysis is based on publicly available information.&nbsp;To recap the M&amp;A market in Korea last year, 427 M&amp;A deals were struck in 2015 worth nearly US$65 billion. 2016 is likely to fare even better.&nbsp;Korea Inc. is becoming less of an octopus and more of a shark. Korea is still dominated by the chaebols but several chaebols such as the Samsung Group are clearly trying to become more of a shark (greater focus on key industries such as tech) and less of an octopus, being diversified in so many different industries.Korean companies' top&nbsp;300 largest companies by market capitalization had cash of about 128 trillion won at end of 2015, up&nbsp;33% YoY.&nbsp;Among the various M&amp;A sectors in Korea in 2016, we find logistics and securities sectors to be quite interesting. In the logistics sector, Coupang (private company) is really revolutionizing the entire competitive structure of the industry. The companies that have been competing in this&nbsp;old, dull industry of packing products in boxes and delivering them must compete effectively against Coupang and catch up to them in terms of customer service, speed, and execution or else exit the industry.In the securities sector, the recent acquisition of KDB Securities by Mirae Asset Securities, should lead to greater consolidation of this industry. In addition, despite the weak brokerage market, the IPO and M&amp;A markets in Korea should flourish this year, barring severe economic distress. The Korean government is also trying to accelerate the M&amp;A market in Korea this year.&nbsp;The Korean National Assembly passed the revisions to the Commercial Code in November 2015 (effective March 2016) which should help to facilitate companies&rsquo; restructuring and investment through M&amp;A.

2016 Korea M&A Market Outlook - What's For Sale?

<p>In our previous report - 2016 Major IPOs Pipeline in Korea, we identified 19 companies that are seeking to complete IPOs in Korea in 2016. In this Part II of our report, we dug deeper and identified 17 more companies that planning to complete IPOs in Korea in 2016. <strong>We believe that IPOs of these 36 companies are likely to represent more than 90% of all capital raised through IPOs this year in the Korea Stock Markets.</strong></p><p>Of these 36 companies planning to complete IPOs, consumer discretionary sector…</p>

In our previous report - 2016 Major IPOs Pipeline in Korea, we identified 19 companies that are seeking to complete IPOs in Korea in 2016. In this Part II of our report, we dug deeper and identified 17 more companies that planning to complete IPOs in Korea in 2016. We believe that IPOs of these 36 companies are likely to represent more than 90% of all capital raised through IPOs this year in the Korea Stock Markets.Of these 36 companies planning to complete IPOs, consumer discretionary sector…

2016 Major IPOs Pipeline in Korea - Part II

<p>This year appears to be an exciting year for IPOs in Korea, barring a dramatic downturn in global equities markets like the one we experienced in 2008. In this report, we highlight some of the major IPOs that are in the pipeline for 2016. Recapping 2015, there were 128 companies in Korea that completed IPOs (including 19 new listings in KOSPI and 109 new listings in KOSDAQ markets). </p><p>The IPO market in Korea is off to a solid start. JS Corporation (194370KS), a leading ODM (original design…</p>

This year appears to be an exciting year for IPOs in Korea, barring a dramatic downturn in global equities markets like the one we experienced in 2008. In this report, we highlight some of the major IPOs that are in the pipeline for 2016. Recapping 2015, there were 128 companies in Korea that completed IPOs (including 19 new listings in KOSPI and 109 new listings in KOSDAQ markets). The IPO market in Korea is off to a solid start. JS Corporation (194370KS), a leading ODM (original design…

Korea / Special Situations, Clepsydra Capital

Sanghyun Park

Korea / Special Situations

<p>For now, CJ officially denied to sell CJ O Shopping (035760). Now, the question is why the talk of possible sale of CJ O Shopping came out in the first place. Despite CJ’s denial, it seems to be true that CJ management made some actions for possible sale of CJ O Shopping. Yes, whether CJ is really serious about selling CJ O Shopping remains uncertain at this moment. But what seems certain is that CJ management and Chairman Lee Jay-hyun appear to be quite determined to concentrate their resources…</p>

For now, CJ officially denied to sell CJ O Shopping (035760). Now, the question is why the talk of possible sale of CJ O Shopping came out in the first place. Despite CJ’s denial, it seems to be true that CJ management made some actions for possible sale of CJ O Shopping. Yes, whether CJ is really serious about selling CJ O Shopping remains uncertain at this moment. But what seems certain is that CJ management and Chairman Lee Jay-hyun appear to be quite determined to concentrate their resources…

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

Event-Driven

<p>The GS merger is coming to an end.</p><p>The exercise of the stock appraisal right will be completed on the following Monday, and the trading suspension of GS Home Shopping stock will start from the following Tuesday.</p><table class="table table-striped">
<colgroup>
<col width="200">
<col width="200">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Timetable"}'>Timetable</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Trade suspension (GS Home Shopping)"}'><strong>Trade suspension (GS Home Shopping)</strong></td>
<td data-sheets-value='{"1":2,"2":"2021. 6. 29 ~ 7. 15"}'><strong>It begins on June 29 and runs until July 15.</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Listing"}'>Listing of new shares</td>
<td data-sheets-value='{"1":3,"3":44393}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 7. 16</td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><p>Currently, the merger arbitrage yield remains below 2%.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Spread - swap"}'>Spread - swap</td>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"Acquirer"}'>Acquirer</td>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"Target company"}'>Target company</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Current price"}'>Current price</td>
<td style="text-align: center;" data-sheets-value='{"1":3,"3":36500}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula='=googlefinance(Terms!R[2]C[0], "price")'>₩36,500</td>
<td style="text-align: center;" data-sheets-value='{"1":3,"3":151400}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula='=googlefinance(Terms!R[5]C[-1], "price")'>₩151,400</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Swap price"}'>Swap price</td>
<td style="text-align: center;" data-sheets-value='{"1":3,"3":33800}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=Terms!R[7]C[0]">₩33,800</td>
<td style="text-align: center;" data-sheets-value='{"1":3,"3":142762}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=Terms!R[13]C[-1]">₩142,762</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - x Swap ratio"}'>- x Swap ratio</td>
<td style="text-align: center;" data-sheets-value='{"1":3,"3":154164.4441}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[-2]C[0]*Terms!R[15]C[0]">₩154,164</td>
<td style="text-align: center;" data-sheets-value='{"1":3,"3":151400}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[-2]C[0]">₩151,400</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Spread"}'><strong>Spread</strong></td>
<td colspan="2" rowspan="1" style="text-align: center;" data-sheets-value='{"1":3,"3":0.01825920805812413}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[-1]C[0]-R[-1]C[1])/R[-1]C[1]"><strong>1.83%</strong></td>
</tr>
<tr><td colspan="3" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART &amp; KRX"}'>Source: DART &amp; KRX</td></tr>
</tbody>
</table><section class="figure"><p>The merger arbitrage yield has remained at 3% since the beginning of this month but has recently fallen to 2%.</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/214/987/original/GS+Retail+%26+GS+Home+Shopping+merger+swap+arb+yield.png?1624505472" class="editor-image img-responsive" data-smartkarma-image-id="214987"></figure><p>This appears to be due to the fact that the stock prices of both companies to be merged greatly exceeded the exercise price of the stock appraisal, so there was little incentive to attract arb traders.</p>
<table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Spread - stock purchase"}'>Spread - stock purchase</td>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"Acquirer"}'>Acquirer - GS Retail</td>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"Target company"}'>Target company - GS Home Shopping</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Current price"}'>Current price</td>
<td style="text-align: center;" data-sheets-value='{"1":3,"3":36450}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[-7]C[0]">₩36,450</td>
<td style="text-align: center;" data-sheets-value='{"1":3,"3":150900}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[-7]C[0]">₩150,900</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Exercise price"}'>Exercise price</td>
<td style="text-align: center;" data-sheets-value='{"1":3,"3":34125}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=Terms!R[12]C[0]">₩34,125</td>
<td style="text-align: center;" data-sheets-value='{"1":3,"3":138855}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=Terms!R[13]C[-1]">₩138,855</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Premium"}'><strong> - Premium to the exercise price</strong></td>
<td style="text-align: center;" data-sheets-value='{"1":3,"3":0.06813186813186813}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[-2]C[0]-R[-1]C[0])/R[-1]C[0]"><strong>6.81%</strong></td>
<td style="text-align: center;" data-sheets-value='{"1":3,"3":0.0867451658204602}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[-2]C[0]-R[-1]C[0])/R[-1]C[0]"><strong>8.67%</strong></td>
</tr>
<tr><td colspan="3" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART &amp; KRX"}'>Source: DART &amp; KRX</td></tr>
</tbody>
</table></section>

The GS merger is coming to an end.The exercise of the stock appraisal right will be completed on the following Monday, and the trading suspension of GS Home Shopping stock will start from the following Tuesday.





Timetable

Trade suspension (GS Home Shopping)
It begins on June 29 and runs until July 15.


Listing of new shares
2021. 7. 16

Source: DART

Currently, the merger arbitrage yield remains below 2%.







Spread - swap
Acquirer
Target company


Current price
₩36,500
₩151,400


Swap price
₩33,800
₩142,762


- x Swap ratio
₩154,164
₩151,400


Spread
1.83%

Source: DART &amp; KRX

The merger arbitrage yield has remained at 3% since the beginning of this month but has recently fallen to 2%.
This appears to be due to the fact that the stock prices of both companies to be merged greatly exceeded the exercise price of the stock appraisal, so there was little incentive to attract arb traders.








Spread - stock purchase
Acquirer - GS Retail
Target company - GS Home Shopping


Current price
₩36,450
₩150,900


Exercise price
₩34,125
₩138,855


 - Premium to the exercise price
6.81%
8.67%

Source: DART &amp; KRX



GS Merger Arb: Let's Capitalize on a Potential Arb Yield Spike on KOSDAQ 150 Rebalancing (June 28)

South Korea

GS Home Shopping Inc. operates a cable television shopping channel and an Internet-based shopping mall.  The Company also sells its merchandise through catalogs delivered via direct mail in Korea.

Price Gauge
52-week Range	0.00 - 0.00
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Dividend (Yield)	0.00

GS Home Shopping (028150 KS)

2016 Korea M&A Market Outlook - What's For Sale?

We highlight 27 Korean companies that are seeking to find new owners through M&A in 2016. Key sectors of M&A in Korea in 2016 include...

Douglas Kim

2016 Major IPOs Pipeline in Korea - Part II

In our previous report - 2016 Major IPOs Pipeline in Korea, we identified 19 companies that are seeking to complete IPOs in Korea in 2016. In this...

Douglas Kim

2016 Major IPOs Pipeline in Korea

This year appears to be an exciting year for IPOs in Korea, barring a dramatic downturn in global equities markets like the one we experienced in...

Douglas Kim

CJ O Shopping (035760) For Sale? Why?

For now, CJ officially denied to sell CJ O Shopping (035760). Now, the question is why the talk of possible sale of CJ O Shopping came out in the...

Sanghyun Park

GS Merger Arb: Let's Capitalize on a Potential Arb Yield Spike on KOSDAQ 150 Rebalancing (June 28)

KOSDAQ 150 rebalancing trading on June 28 will cause a temporary drop in GS Home Shopping's share price, leading to a further stretch of the GS...

Sanghyun Park

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52-week Range

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