Cheil raises $1.4b in landmark Korean IPO

Listing of the de facto holding company for Samsung Group is Korea's largest for four years, surpassing Samsung SDS's month-old share sale.

Cheil Industries, the de facto holding company for Samsung Group, raised $1.4 billion in an initial public offering of its shares on Friday, South Korea’s biggest IPO in four years.

Cheil sold 28.7 million shares at W53,000 per unit, at the top of the indicative W45,000 to W53,000 price range pitched by bankers.

The flotation met with exceptionally strong demand, attracting roughly $30 billion worth of orders from global institutional investors, according to bankers close to the deal. Books formerly opened two weeks ago.

“Basically anyone and everyone was in the book. We had well over 200 lines,” one banker told FinanceAsia, noting solid interest from long-only institutional investors, hedge funds and sovereign wealth funds. “We had $30 billion in orders but only allocated $340 million to the institutional portion. It was a ridiculous amount of demand.”

Shareholders Samsung SDI, Samsung Card and KCC Corp sold a combined 18.7 million shares, while an additional 10 million new shares were issued by Cheil.  

Half the deal was made available to institutional investors, while 20% was earmarked for the domestic retail tranche, 20% for the employee share buyback programme and 10% for a high-risk, high-yield investment trust tranche.

KDB Daewoo Securities, Citi, JP Morgan and Woori Investment & Securities were global coordinators and joint bookrunners.  

The IPO comes as South Korea’s largest conglomerate re-organises ahead of an expected once-in-a-generation change in leadership. Lee Jae Yong, heir apparent to the Samsung Group, will likely step up and take control of the company after his 72-year-old father was hospitalised in May.

Cheil, which operates in four sectors — theme park, construction, food and fashion — will be the key vehicle through which the Lee family will retain control of the Samsung Group.

Month after SDS

The IPO comes one month after Samsung SDS’s tremendously successful flotation.

Samsung SDS, which provides technology for the construction and manufacturing industries, raised $1.1 billion in its flotation after shareholder Samsung Electro-Mechanics offloaded 6.09 million shares at W190,000 per unit, the top of its W150,000 to W190,000 price range.

In addition to receiving excellent demand at the time of the IPO — the international tranche was 45 times oversubscribed — the subsequent market performance has been exceptional, with shares in Samsung SDS up 82% by the December 4 close.

Samsung SDS is now the fifth most valuable company in South Korea with a market capitalisation of $26 billion.

The restructuring of the Samsung Group — which includes a diverse range of businesses spanning televisions, smartphones, insurance and construction — will ensure that the heir apparent Lee and his siblings retain control of the company.

The three heirs will face inheritance taxes of more than $5 billion out of their father Lee Kun-hee’s $11.2 billion fortune. Samsung SDS’s IPO proceeds will help the heirs pay down this inheritance tax once it falls due.

Elsewhere in Korea

It was a busy night in Korea, with the country’s ministry of strategy and finance separately offloading 21 million shares in the Industrial Bank of Korea (IBK) and raising $279 million from the accelerated offering. 

Shares priced at W14,800, a tight 2.3% discount to the December 4 closing price of W15,150. It was the lower end of the discount range — books opened late Thursday night with a discount between 2.3% to 5%. Bank of America Merrill Lynch, JP Morgan, Korea Investment & Securities and Samsung Securities handled the share sale.

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