Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

I investigate special situations, pairs, and index rebalancing trades in Korea.

Korea / Special Sits, Pairs, Index Rebalancing

How Would We Capitalize on a Massive Discount Present on Doosan Infracore Business Unit?

Doosan Infracore Rebalancing Trading on June 28 & Outright Short-Selling Opportunity

Doosan Infracore Announces a Rights Offering Worth 70% of Its Market Cap

Doosan Split/Merger: Infracore in Overshooting

Doosan Heavy, Korea's Latest Meme Stock Without Substance?

Gravity Works As WeWork Doesn't; Now Plan B

Clepsydra Capital

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

Event-Driven

<h2>A quick recap of the split-merger</h2><p>Doosan Infracore is a company that produces and sells construction equipment and engines. It is also engaged in the investment business of managing major affiliates. Now, Doosan Infracore's investment division merges with Doosan Heavy Industries &amp; Constructions.</p><p>Doosan Infracore will first spin off its business division and investment division. Through this, Doosan Infracore shareholders will have a stake in each business division. After that, Doosan Infracore investors will go through the process of exchanging their investment division shares for Doosan Heavy Industries &amp; Construction shares.</p><p><strong>For example, suppose you own 100 shares of Doosan Infracore.</strong></p><p><strong>Doosan Infracore split the business division and investment division at 0.31:0.69 (rounded to two decimal places).</strong> The investment division, which owns affiliate stocks, is larger than the business division. This is because Doosan Infracore owns a 51.05% stake in Doosan Bobcat and has included this stake as an investment asset. In other words, Doosan Bobcat is separated from Doosan Infracore to merge with Doosan Heavy. </p><table class="table table-striped">
<colgroup>
<col width="200">
<col width="200">
</colgroup>
<tbody>
<tr><td colspan="2" style="width: 726.008px;" data-sheets-value='{"1":2,"2":"Swap ratio"}'>Doosan Infracore split ratio</td></tr>
<tr>
<td style="width: 352.5px;" data-sheets-value='{"1":2,"2":"Doosan Infracore split ratio"}'>Business division</td>
<td style="text-align: right; width: 352.514px;" data-sheets-value='{"1":3,"3":0.6895026}' data-sheets-numberformat='{"1":2,"2":"#,##0.0000000","3":1}'><strong>0.3104974</strong></td>
</tr>
<tr>
<td style="width: 352.5px;" data-sheets-value='{"1":2,"2":"Swap ratio with Doosan Heavy"}'>Investment division (owning a 51.05% stake in Doosan Bobcat)</td>
<td style="text-align: right; width: 352.514px;" data-sheets-value='{"1":3,"3":0.47342703366485994}' data-sheets-numberformat='{"1":2,"2":"#,##0.0000000","3":1}' data-sheets-formula="=R[-2]C[0]*R[-1]C[0]"><strong>0.6895026</strong></td>
</tr>
<tr><td colspan="2" style="width: 726.008px;" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><p>Anyway, if 100 shares are divided according to the split ratio, 31 shares go to the business division, and 69 shares go to the investment division. And your 69 shares in the investment division are converted back to Doosan Heavy stocks according to the merger ratio with Doosan Heavy.</p><p>Doosan Infracore and Doosan Heavy Industries set a merger ratio of 0.69:1 (rounded to two decimal places). <strong>That is, 1 share of Doosan Infracore's investment division will receive 0.69 shares of the merged company. So, 69 shares of Doosan Infracore's investment division will be converted into 47 shares of the merged company, making the final swap ratio 0.47 (again rounded to two decimal places).</strong></p><table class="table table-striped">
<colgroup>
<col width="200">
<col width="200">
</colgroup>
<tbody>
<tr><td colspan="2" style="width: 726.008px;" data-sheets-value='{"1":2,"2":"Swap ratio"}'>Merger ratio &amp; final swap ratio</td></tr>
<tr>
<td style="width: 352.5px;" data-sheets-value='{"1":2,"2":"Doosan Infracore split ratio"}'>Merger ratio between Doosan Infracore Investment Division &amp; Doosan Heavy Industries</td>
<td style="text-align: right; width: 352.514px;" data-sheets-value='{"1":3,"3":0.6895026}' data-sheets-numberformat='{"1":2,"2":"#,##0.0000000","3":1}'><strong>0.6866211</strong></td>
</tr>
<tr>
<td style="width: 352.5px;" data-sheets-value='{"1":2,"2":"Swap ratio with Doosan Heavy"}'>
<p>Final swap ratio for each share of Doosan Infracore</p>
<p><strong>: Split ratio (0.6895026) × Merger ratio (0.6866211)</strong></p>
</td>
<td style="text-align: right; width: 352.514px;" data-sheets-value='{"1":3,"3":0.47342703366485994}' data-sheets-numberformat='{"1":2,"2":"#,##0.0000000","3":1}' data-sheets-formula="=R[-2]C[0]*R[-1]C[0]"><strong>0.4719929</strong></td>
</tr>
<tr><td colspan="2" style="width: 726.008px;" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><div class="content-highlight">
<p><strong>In conclusion:</strong></p>
<p><strong>Your 100 shares of Doosan Infracore are divided into 31 shares of Doosan Infracore business unit and 47 shares of Doosan Heavy Industries &amp; Construction.</strong></p>
</div><p>Doosan Infracore's largest shareholder is Doosan Heavy Industries &amp; Construction (a 35% stake).  Doosan Infracore's minority shareholders will receive Doosan Heavy shares according to the merger ratio, but new shares are not allocated to Doosan Heavy Industries &amp; Construction.</p><h2>Schedule</h2><p>March 19 was the day Doosan Infracore and Doosan Heavy Industries &amp; Construction signed a merger agreement. April 5 was the day to determine the shareholders who could exercise their voting rights when the spinoff-merger was listed on the agenda of the general meeting of shareholders.</p><p>From April 28 to May 13, you must have notified the company of your intention in writing to oppose the spin-off merger. If you hadn't expressed your objection during this period, you were automatically considered to favor the spin-off and merger, and you will receive Doosan Heavy's new shares according to the split-merger ratio.</p><p>On May 13, the spinoff and merger agenda passed the general shareholders' meeting. The merger is a matter of a special resolution at the general meeting of shareholders. At least two-thirds of the shareholders present and at least one-third of the total number of issued stocks must agree.</p><p>Shareholders who had expressed their opposition could exercise their stock appraisal rights from May 13 to June 2. <strong>Shareholders of Doosan Infracore who exercised their stock requisition rights can receive ₩8,224 per share, and shareholders of Doosan Heavy can receive a cash refund of ₩11,447 per share.</strong></p><p>On July 1, Doosan Infracore's investment division will be legally transferred to Doosan Heavy Industries &amp; Construction. From June 29 to July 20, Doosan Infracore stock trading is suspended. Lastly, July 21 marks the first day that Doosan Infracore shareholders can trade their business division stocks and Doosan Heavy's new stocks on the stock market.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" style="width: 723.636px;" data-sheets-value='{"1":2,"2":"Schedule"}'>Schedule</td></tr>
<tr>
<td style="width: 351.818px;">Split-merger contract date</td>
<td style="text-align: right; width: 350.909px;">March 19</td>
</tr>
<tr>
<td style="width: 351.818px;" data-sheets-value='{"1":2,"2":"Record date for appraisal rights"}'>Appraisal rights record date</td>
<td style="text-align: right; width: 350.909px;" data-sheets-value='{"1":3,"3":44291}' data-sheets-numberformat='{"1":5,"2":"mmmm d","3":1}'>April 5</td>
</tr>
<tr>
<td style="width: 351.818px;" data-sheets-value='{"1":2,"2":"Dissenting opinion notice"}'>Dissenting opinion notice</td>
<td style="text-align: right; width: 350.909px;" data-sheets-value='{"1":2,"2":"April 28~May 13"}'>April 28~May 13</td>
</tr>
<tr>
<td style="width: 351.818px;" data-sheets-value='{"1":2,"2":"Shareholder meeting"}'>Shareholder meeting</td>
<td style="text-align: right; width: 350.909px;" data-sheets-value='{"1":3,"3":44329}' data-sheets-numberformat='{"1":5,"2":"mmmm d","3":1}'>May 13</td>
</tr>
<tr>
<td style="width: 351.818px;" data-sheets-value='{"1":2,"2":"Appraisal rights exercise"}'>Appraisal rights exercise</td>
<td style="text-align: right; width: 350.909px;" data-sheets-value='{"1":2,"2":"May 13~June 2"}'>May 13~June 2</td>
</tr>
<tr>
<td style="width: 351.818px;" data-sheets-value='{"1":2,"2":"Trade suspension"}'><strong>Trade suspension (Infracore)</strong></td>
<td style="text-align: right; width: 350.909px;" data-sheets-value='{"1":2,"2":"June 29~July 20"}'><strong>June 29~July 20</strong></td>
</tr>
<tr>
<td style="width: 351.818px;" data-sheets-value='{"1":2,"2":"Re-listing"}'><strong>Re-listing</strong></td>
<td style="text-align: right; width: 350.909px;" data-sheets-value='{"1":3,"3":44398}' data-sheets-numberformat='{"1":5,"2":"mmmm d","3":1}'><strong>July 21</strong></td>
</tr>
<tr><td colspan="2" style="width: 723.636px;" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><h2>Carve-out closure</h2><p>After the spin-off and merger, Doosan Infracore's business division will soon be sold to Hyundai Heavy Industries Holdings. On February 5, Doosan Heavy announced that it would sell a 35% stake in Doosan Infracore business to Hyundai Heavy Industries Holdings. That is, Doosan Heavy and Hyundai Heavy Industries Holdings signed a carve-out contract to sell only Doosan Infracore's business division.</p><p><strong>In fact, the spin-off and merger of Doosan Infracore and Doosan Heavy Industries is a process for a carve-out deal signed with Hyundai Heavy Industries Holdings.</strong></p><p>If this spinoff and merger are completed without any problems, the largest shareholder in Doosan Infracore's business division will be Hyundai Heavy Industries Holdings. <strong>In the future, Doosan Infracore's business division is expected to merge with Hyundai Construction Equipment (267270 KS)</strong>.</p><div class="content-highlight">
<p><strong>In conclusion:</strong></p>
<p><strong>The shares of Doosan Infracore shareholders are eventually divided into shares of Doosan Heavy Industries and shares of Hyundai Construction Equipment.</strong></p>
</div>

A quick recap of the split-mergerDoosan Infracore is a company that produces and sells construction equipment and engines. It is also engaged in the investment business of managing major affiliates. Now, Doosan Infracore's investment division merges with Doosan Heavy Industries &amp; Constructions.Doosan Infracore will first spin off its business division and investment division. Through this, Doosan Infracore shareholders will have a stake in each business division. After that, Doosan Infracore investors will go through the process of exchanging their investment division shares for Doosan Heavy Industries &amp; Construction shares.For example, suppose you own 100 shares of Doosan Infracore.Doosan Infracore split the business division and investment division at 0.31:0.69 (rounded to two decimal places). The investment division, which owns affiliate stocks, is larger than the business division. This is because Doosan Infracore owns a 51.05% stake in Doosan Bobcat and has included this stake as an investment asset. In other words, Doosan Bobcat is separated from Doosan Infracore to merge with Doosan Heavy. 





Doosan Infracore split ratio

Business division
0.3104974


Investment division (owning a 51.05% stake in Doosan Bobcat)
0.6895026

Source: DART

Anyway, if 100 shares are divided according to the split ratio, 31 shares go to the business division, and 69 shares go to the investment division. And your 69 shares in the investment division are converted back to Doosan Heavy stocks according to the merger ratio with Doosan Heavy.Doosan Infracore and Doosan Heavy Industries set a merger ratio of 0.69:1 (rounded to two decimal places). That is, 1 share of Doosan Infracore's investment division will receive 0.69 shares of the merged company. So, 69 shares of Doosan Infracore's investment division will be converted into 47 shares of the merged company, making the final swap ratio 0.47 (again rounded to two decimal places).





Merger ratio &amp; final swap ratio

Merger ratio between Doosan Infracore Investment Division &amp; Doosan Heavy Industries
0.6866211



Final swap ratio for each share of Doosan Infracore
: Split ratio (0.6895026) × Merger ratio (0.6866211)

0.4719929

Source: DART


In conclusion:
Your 100 shares of Doosan Infracore are divided into 31 shares of Doosan Infracore business unit and 47 shares of Doosan Heavy Industries &amp; Construction.
Doosan Infracore's largest shareholder is Doosan Heavy Industries &amp; Construction (a 35% stake).  Doosan Infracore's minority shareholders will receive Doosan Heavy shares according to the merger ratio, but new shares are not allocated to Doosan Heavy Industries &amp; Construction.ScheduleMarch 19 was the day Doosan Infracore and Doosan Heavy Industries &amp; Construction signed a merger agreement. April 5 was the day to determine the shareholders who could exercise their voting rights when the spinoff-merger was listed on the agenda of the general meeting of shareholders.From April 28 to May 13, you must have notified the company of your intention in writing to oppose the spin-off merger. If you hadn't expressed your objection during this period, you were automatically considered to favor the spin-off and merger, and you will receive Doosan Heavy's new shares according to the split-merger ratio.On May 13, the spinoff and merger agenda passed the general shareholders' meeting. The merger is a matter of a special resolution at the general meeting of shareholders. At least two-thirds of the shareholders present and at least one-third of the total number of issued stocks must agree.Shareholders who had expressed their opposition could exercise their stock appraisal rights from May 13 to June 2. Shareholders of Doosan Infracore who exercised their stock requisition rights can receive ₩8,224 per share, and shareholders of Doosan Heavy can receive a cash refund of ₩11,447 per share.On July 1, Doosan Infracore's investment division will be legally transferred to Doosan Heavy Industries &amp; Construction. From June 29 to July 20, Doosan Infracore stock trading is suspended. Lastly, July 21 marks the first day that Doosan Infracore shareholders can trade their business division stocks and Doosan Heavy's new stocks on the stock market.





Schedule

Split-merger contract date
March 19


Appraisal rights record date
April 5


Dissenting opinion notice
April 28~May 13


Shareholder meeting
May 13


Appraisal rights exercise
May 13~June 2


Trade suspension (Infracore)
June 29~July 20


Re-listing
July 21

Source: DART

Carve-out closureAfter the spin-off and merger, Doosan Infracore's business division will soon be sold to Hyundai Heavy Industries Holdings. On February 5, Doosan Heavy announced that it would sell a 35% stake in Doosan Infracore business to Hyundai Heavy Industries Holdings. That is, Doosan Heavy and Hyundai Heavy Industries Holdings signed a carve-out contract to sell only Doosan Infracore's business division.In fact, the spin-off and merger of Doosan Infracore and Doosan Heavy Industries is a process for a carve-out deal signed with Hyundai Heavy Industries Holdings.If this spinoff and merger are completed without any problems, the largest shareholder in Doosan Infracore's business division will be Hyundai Heavy Industries Holdings. In the future, Doosan Infracore's business division is expected to merge with Hyundai Construction Equipment (267270 KS).
In conclusion:
The shares of Doosan Infracore shareholders are eventually divided into shares of Doosan Heavy Industries and shares of Hyundai Construction Equipment.


Doosan Heavy/Infracore Corporate Actions Walkthrough & KOSPI 200 Index Treatments

Doosan Enerbility

Doosan Heavy/Infracore Corporate Actions Walkthrough & KOSPI 200 Index Treatments