Korea / Special Situations, Clepsydra Capital

Sanghyun Park

I investigate special situations in Korea.

Korea / Special Situations

Cuckoo Holdings & Cuckoo Homesys Tender Offer Event Summary

Cuckoo Electronics' Holdco/​Opco Demerger - Summary & Valuation Study

Event-Driven

<a href="https://www.smartkarma.com/entities/4231" target="_blank" data-smartkarma-citation="entities:4231:1">Cuckoo Electronics Co Ltd (192400 KS)</a> shareholders approved the company's spinoff plan yesterday on Oct 31. This means Cuckoo Electronics' transformation process into a holding firm is almost done.<div class="content-highlight">Below is the link of this regulatory filing at DART.<a href="https://dart.fss.or.kr/dsaf001/main.do?rcpNo=20171031800486" target="_blank">https://dart.fss.or.kr/dsaf001/main.do?rcpNo=20171031800486</a></div>Cuckoo Electronics made it official that it would do a spinoff based holdco conversion back in July this year.<div class="content-highlight">I already wrote a piece on this.<a href="https://www.smartkarma.com/insights/cuckoo-electronics-holdco-opco-demerger-summary-valuation-study" target="_blank" data-smartkarma-citation="insights:12120">Cuckoo Electronics’ Holdco/Opco Demerger - Summary &amp; Valuation Study</a></div>Cuckoo's case is a bit unconventional as it is taking a two-step process, which is also rare by Korea's standards. That is, Cuckoo Electronics (Former Entity) will first spin off its rental business unit through equity spinoff. This "New Entity #1#"is named "Cuckoo Homesys". This will be the first step. Now, in the second step, another entity will be spun off from Cuckoo Electronics through physical division. This "New Entity #2", named "Cuckoo Electronics", will be responsible for Cuckoo Electronics (Former Entity)'s home electronic appliance business (mostly, its highly popular rice cookers). The Former Entity will then become a Holdco (tentatively named "Cuckoo Holdings") as the surviving entity. Well, still sounds a little confusing? Basically, we will have something like below.<table class="table table-striped"><tbody><tr><td colspan="2" style="text-align: center; width: 734px;">Cuckoo Electronics split-off/holdco conversion process</td></tr><tr><td colspan="2" style="text-align: center; width: 734px;">Cuckoo Electronics(Former entity)</td></tr><tr><td colspan="2" style="text-align: center; width: 734px;">↓</td></tr><tr><td colspan="2" style="text-align: center; width: 734px;">Cuckoo Holdings(Surviving entity): To be re-listed: Holdco management/operation</td></tr><tr><td style="text-align: center; width: 366.57611083984375px;">↓Equity spinoff</td><td style="text-align: center; width: 367.42388916015625px;">↓Physical division</td></tr><tr><td style="text-align: center; width: 366.57611083984375px;">Cuckoo Homesys(New entity #1): To be newly listed: Rental business</td><td style="text-align: center; width: 367.42388916015625px;">Cuckoo Electronics(New entity #2): To remain private: Home electronic appliance business</td></tr><tr><td colspan="2" style="width: 734px;">Source: DART, <a href="https://www.smartkarma.com/profiles/354" target="_blank" data-smartkarma-citation="accounts:354">Sanghyun Park</a></td></tr></tbody></table>In the end, we will have something like this. Cuckoo Electronics will be transformed from the below structure into the below below structure.<div class="content-caption">(Current governance structure - Courtesy Cuckoo Electronics)</div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/037/044/original/1.jpeg?1509521460" class="editor-image img-responsive" data-smartkarma-image-id="37044"></figure><div class="content-caption">(New governance structure - Courtesy Cuckoo Electronics)</div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/037/046/original/2.jpg?1509521861" class="editor-image img-responsive" data-smartkarma-image-id="37046"></figure>

Cuckoo Electronics Co Ltd (192400 KS) shareholders approved the company's spinoff plan yesterday on Oct 31. This means Cuckoo Electronics' transformation process into a holding firm is almost done.Below is the link of this regulatory filing at DART.https://dart.fss.or.kr/dsaf001/main.do?rcpNo=20171031800486Cuckoo Electronics made it official that it would do a spinoff based holdco conversion back in July this year.I already wrote a piece on this.Cuckoo Electronics’ Holdco/Opco Demerger - Summary &amp; Valuation StudyCuckoo's case is a bit unconventional as it is taking a two-step process, which is also rare by Korea's standards. That is, Cuckoo Electronics (Former Entity) will first spin off its rental business unit through equity spinoff. This "New Entity #1#"is named "Cuckoo Homesys". This will be the first step. Now, in the second step, another entity will be spun off from Cuckoo Electronics through physical division. This "New Entity #2", named "Cuckoo Electronics", will be responsible for Cuckoo Electronics (Former Entity)'s home electronic appliance business (mostly, its highly popular rice cookers). The Former Entity will then become a Holdco (tentatively named "Cuckoo Holdings") as the surviving entity. Well, still sounds a little confusing? Basically, we will have something like below.Cuckoo Electronics split-off/holdco conversion processCuckoo Electronics(Former entity)↓Cuckoo Holdings(Surviving entity): To be re-listed: Holdco management/operation↓Equity spinoff↓Physical divisionCuckoo Homesys(New entity #1): To be newly listed: Rental businessCuckoo Electronics(New entity #2): To remain private: Home electronic appliance businessSource: DART, Sanghyun ParkIn the end, we will have something like this. Cuckoo Electronics will be transformed from the below structure into the below below structure.(Current governance structure - Courtesy Cuckoo Electronics)(New governance structure - Courtesy Cuckoo Electronics)

Update on Cuckoo Electronics' Spinoff Based Holdco Conversion Process