S.Korea set for record IPO year as conglomerates prepare to sell family silver

SAMSUNG SDS

28/03/2016 24:00

* Giants like Samsung, Lotte streamlining structures 
    * Family-run firms ironing out succession, debt issues 
    * 'Chaebol' IPOs seen raising at least $8 bln in 2016 
    * Hotel Lotte set to be S.Korea's biggest-ever IPO 
    * IPO pickup as Seoul stocks rise, China jitters remain 
 
    By Elzio Barreto 
    HONG KONG, March 28 (Reuters) - Riding a Seoul stocks 
revival, some of South Korea's biggest family firms are set to 
clean house this year with multi-billion dollar initial public 
offerings that will fire the country to a record year for new 
listings. 
    Family-run conglomerates, or "chaebols", like Samsung, 
Doosan and Lotte are listing assets to streamline structures, 
smooth paths toward management succession or ease debt burdens. 
Added to other deals in the pipeline, IPOs planned by these 
three will take proceeds this year to at least $10 billion, 
bankers say, eclipsing 2010's high of $8.5 billion. 
    Coming on the back of a near-10 percent rally in Seoul's 
benchmark share index  .KS11  since mid-February, the sales will 
test international investor appetite for minority holdings in 
firms dominated by some of the best-known names in South Korean 
business. But the scale of the IPOs and relative stability of 
the domestic market compared to jitters over prospects in China 
this year make them a magnet for Korean investors at least.   
    "We have to pay attention to these listings because they are 
large-cap deals," said Park Sung-jin, a fund manager at Woori 
Asset Management in Seoul. "Benchmark funds, such as those for 
(Korea's) National Pension Service, cannot pass them by," he 
said, referring to the world's third-largest pension fund with 
about $81 billion invested in South Korean stocks at end-2015. 
    IPOs expected this year include Hotel Lotte Co, potentially 
the country's biggest ever at up to $5 billion, drugmaker 
Samsung Biologics and construction equipment maker Doosan Bobcat 
Inc, the latter two seen worth $2 billion and $1 billion 
respectively. urn:newsml:reuters.com:*:nL3N14X1WG urn:newsml:reuters.com:*:nL3N14A06U 
    Hotel Lotte's listing is expected in the second half of June 
while Doosan Bobcat's is due in the fourth quarter of 2016, 
Thomson Reuters publication IFR reported. Samsung Biologics 
hasn't disclosed a timeline for its deal.  
    Amid the resurgence in Seoul's IPO interest, newer firms are 
also set to pile in, including top mobile game maker Netmarble 
Games with a projected $1.7 billion listing.  urn:newsml:reuters.com:*:nL3N16C1V4  
    The expected surge in activity would still leave Seoul 
firmly in the shadow of Hong Kong, where IPOs at the local 
exchange tally totaled $23.7 billion last year, making it the 
world's biggest IPO venue. 
    But compared with the $3.5 billion raised in South Korean 
IPOs last year, 2016's potential growth points to determination 
among the "chaebols" to take action. As well as IPOs, secondary 
issuance is being lined up in already listed businesses like 
insurer Samsung Life Co Ltd  032830.KS  and steelmaker POSCO, 
bankers say.   
 
    IN THE STARS 
    "Stars are aligning so that a lot of those corporates need 
to do something, hence the resulting rise in activities," said a 
Seoul-based equity capital markets banker, who couldn't be named 
because details of the deals have not been made public. 
    Still, investors may have just cause for a pause to consider 
exactly what they're getting into. 
    The Lotte Group plan to list one of the jewels in a consumer 
goods to leisure business empire comes after a bitter succession 
feud between sons of company founder Shin Kyuk-ho flared into 
public view last year. Bankers say the sale is nonetheless being 
primed  to beat South Korea's existing IPO record, set in 2010 
when Samsung Life Insurance raised $4.4 billion.  urn:newsml:reuters.com:*:nL3N10S1GK 
    Meanwhile Samsung Group is immersed in its own succession 
preparations. Since 2014, it has been reshuffling its sprawling 
array of listed assets to cement the position of Jay Y. Lee, 
vice chairman of tech giant Samsung Electronics  005930.KS  and 
heir-apparent to ailing patriarch Lee Kun-hee.  
    Those moves triggered an acrimonious spat with minority 
investor Elliott Management last year that saw the hedge fund 
air complaints alleging Samsung disregard for shareholders in 
Seoul courtrooms. Elliott lost its case and ultimately sold its 
shares - but not before casting the spotlight on Samsung's 
approach to corporate governance.  urn:newsml:reuters.com:*:nL3N10I02O 
    Whatever the issues at Lotte and Samsung last year, bankers 
expect strong interest in deals in 2016. 
    Before the major IPOs kick off, South Korea has already 
racked up $2.7 billion worth of deals, and bankers expect 
secondary offerings this year from firms like Samsung Life, 
steelmaker POSCO  005490.KS  and Doosan Co Ltd  000150.KS . All 
three firms declined to comment. 
    "South Korea has been very resilient despite all the stress 
and worries in the rest of Asia," said a senior Hong Kong-based 
equity capital market banker working on several Seoul deals, who 
could not be named discussing the matter. 
 
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South Korean IPOs, follow on deals since 2000    http://tmsnrt.rs/1LFYONq 
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 (Additional reporting by Joyce Lee in SEOUL; Editing by Denny 
Thomas and Kenneth Maxwell) 
 ((elzio.barreto@thomsonreuters.com;)(852)(2843-1608; Reuters 
Messaging: elzio.barreto.thomsonreuters.com@reuters.net)) 
 
Keywords: SOUTHKOREA IPO/