Korea / Special Situations, Clepsydra Capital

Sanghyun Park

Korea / Special Situations

Event-Driven

SeAH Steel Corporation (003030 KS), which is one of Korea's mid-sized conglomerates, recently became Korea's latest one to embark on holding company conversion. Due to its smaller size, it hasn't received much attention from the market. But thanks to the recent profit-taking opportunities provided by the HDC holdco conversion, there has been 'locally' a growing interest in this SeAH Steel holdco conversion event. So, here is a summary of this event. The official spinoff date is Sep 1, 2018. The divestiture will be finalized at OGM scheduled for July 27, 2018. SeAH Steel Corporation (003030 KS) shares will be suspended for trade from Aug 30 to Oct 4, 2018. New shares will be re-listed on Oct 5, 2018.Important eventsBoard resolutionApr 9, 2018Divestiture finalization at EGMJuly 27, 2018 * Shareholder registry closure for EGMApr 30, 2018Divestiture registrationSep 1, 2018Stock trade suspension periodAug 30 - Oct 4, 2018Re-listing (for both entities)Oct 5, 2018Source: DARTThis is basically a two-way split. SeAH Steel Corporation (003030 KS) is scheduled to be split into holdco (SeAH Steel Holdings) and opco (SeAH Steel) based on a spinoff ratio of 0.5272833 to 0.4727167. SeAH Steel Holdings is going to be a surviving entity, whereas SeAH Steel is going to be a new entity. The holdco is going to take all the subsidiaries stakes while the opco is going to operate as a pure stand-alone business. As shown below, the holdco is going to directly manage the opco along with the two other subsidiaries, SeAH International and SeAH CM. Then, all other subsidiaries are going to be placed under SeAH International.Entity nameBusiness roleSpinoff methodEntity statusSpinoff ratioSeAH Steel HoldingsHoldcoEquity spinoffSurviving entity0.5272833SeAH SteelOpcoEquity SpinoffNew entity0.4727167Source: DART(SeAH Steel's current governance structure - Source: DART)(SeAH Steel's post demerger governance structure - Source: DART)Spinoff ratio was determined based on FY17 4Q financials. Spinoff ratio calculation is as follows:As of Dec 2017 (₩ mil)Pre demergerSeAH Steel HoldingsHoldco - surviving entitySeAH SteelOpco - new entityEquity1,161,274612,320550,070Split ratio1.0000000.52728330.4727167Split ratio calculation-612,320/1,161,274550,070/1,161,274Source: DART, Sanghyun ParkAs of Dec 2017 (₩ mil)Pre demergerSeAH Steel HoldingsHoldco - surviving entitySeAH SteelOpco - new entityAssets1,749,526669,0241,081,618Current assets574,58075,450499,130Non-current assets1,174,946593,574582,488Liabilities588,25256,704531,548Current liabilities378,48741,587336,900Non-current liabilities209,76515,117194,648Equity1,161,274612,320550,070Capital30,00015,81914,182Other paid-in capital58,707-476,065535,888Earnigns surplus1,028,5331,028,533-Other44,03444,034-Split ratio based on equity-0.52728330.4727167Source: DARTThe major shareholder side (the owner family) currently has a combined 47.64% stake in SeAH Steel. With 3.19% treasury shares, their total stake amounts to 50.83%. Among the institutional investors, NPS and Bearing have 10.36% and 6.46%, respectively.SeAH Steel - shareholding structureAPAC Investors * 78.0% owned by Lee Soon-hyeong and 20.1% owned by Lee Ju-seong750,43212.51%Lee Ju-seong700,84911.68%Lee Soon-hyeong680,55611.34%Lee Tae-seong252,0114.20%SeAH Haeam Academic Scholarship Foundation162,7572.71%SeAH Lee Won-hyeong Cultural Foundation137,2432.29%Kim Hae-young96,6581.61%Lee Joo-hyun36,9600.62%LEE ALEXIS JENNIFERES32,0000.53%Huh In-hong4,3000.07%Huh Eun-hong4,3000.07%Lee Hui-ryeong5000.01%Total owned by the major shareholder and the special affiliate persons2,858,56647.64%Treasury shares191,5073.19%Source: FnGuideSeAH Steel - major institutional investorsNPS621,72810.36%Bearing Asset387,8546.46%Mirae-1.21%KIM-0.85%Samsung-0.83%NH-Amundi-0.67%Shinyoung-0.48%KB-0.32%Hanwha-0.32%Kyobo-AXA-0.08%Shinhan BNP Paribas-0.08%Source: FnGuide

South Korea

SeAH Steel Holdings Corporation manufactures and sells steel pipes. The Company produces and sells spiral, stainless, titanium tubes, and other products. SeAH Steel Holdings markets its products throughout Korea.

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SeAH Steel Holdings (003030 KS)

SeAH Steel Holdco Conversion Summary

SeAH Steel Corporation (003030 KS), which is one of Korea's mid-sized conglomerates, recently became Korea's latest one to embark on holding...

Sanghyun Park

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