Hana, Shinsegae blocks keep focus on Korea

KEB raises $321 million from a sell-down in Hana, while IBK exits Shinsegae via an $82 million transaction.
Korea Exchange Bank sold about two-thirds of its stake in Hana Financial Group, raising W340.41 billion ($321 million).
Korea Exchange Bank sold about two-thirds of its stake in Hana Financial Group, raising W340.41 billion ($321 million).

Two more block trades were completed in the Korean market on Tuesday after BNP Paribas’ sell-down in Shinhan Financial on Monday.

Korea Exchange Bank (KEB) sold about two-thirds of its stake in Hana Financial Group, raising W340.41 billion ($321 million), and Industrial Bank of Korea (IBK) offloaded its entire position in Shinsegae, an operator of department stores and discount stores, for W86.6 billion ($82 million).

Both stocks have had a strong run since late August and are trading at or near year-highs, but even so the two sellers achieved pretty tight discounts.

At a 2% discount, the Hana trade even came tighter than the smaller $211 million Shinhan deal on Monday, which was priced at the bottom of the range for a 3.4% discount. It did help, of course, that there were enough anchor orders to cover almost the entire deal at launch.

On the back of that, other investors were happy to come in as well and, when the order books closed after a couple of hours, the Hana deal was more than one-and-a-half times covered and had attracted about 40 investors, one source said. The price was fixed at the bottom of the indicated range, however, as this was the level where the anchors had agreed to come in.

The smaller Shinsegae block was offered at a more generous discount to start with, but good demand from both international and domestic long-only funds allowed the bookrunner to fix the price at the top of the range for a 3.0% discount. It too was described as “fairly well covered” at launch thanks to a number of anchor orders.

Goldman Sachs acted as the sole bookrunner on the Hana transaction, and was also a joint bookrunner together with JP Morgan on IBK’s exit from Shinsegae.

Hana Financial

When Hana’s takeover of KEB was completed earlier this year through a share swap with minority shareholders (following its earlier acquisition of Lone Star’s 60% stake), KEB itself ended up holding about 12.7 million shares, or a 4.4% stake, in Hana. It is this stake that it has now started to sell down.

KEB sold 8.4 million shares, which represents 2.9% of Hana's total issued share capital and about six to eight trading days, based on the average daily trading volume. The shares were offered at a price between W40,525 and W40,750 apiece, which translated into a discount of 1.45% to 2.0% versus Tuesday’s closing price of W41,350.

As noted, the price was fixed at W40,525 for the maximum 2% discount.

According to the source, about two-thirds of the deal went to long-only investors with domestic investors taking about 20%.

KEB will still own about 4.3 million shares in Hana following this transaction, which will be locked-up for 45 days. Based on the placement price, the 1.5% stake is valued at about $164 million.

The bank had been expected to sell the Hana shares before the end of this year and the fact that it chose to do it shortly after Hana reported solid third quarter results last Friday was not really a surprise, given that the share price has risen almost 24% since August 28. Even after a 2.7% drop in the past couple of sessions, the stock is up 19.2% so far this year, which compares with a 1.5% gain in the benchmark Kospi composite index.

The source noted that the fact BNP’s sell-down in Shinhan had priced at a wider discount than what KEB had in mind was a bit “frustrating” and there was also a belief that the domestic investor participation was not that strong. However, KEB decided to grab the window and go ahead nonetheless.

Shinhan’s share price fell 2.9% on Tuesday in the wake of the transaction, but finished just above the W47,000 placement price, at W47,250.

Hana said on Friday that its net profit improved by 63% in the July to September quarter from a year earlier to W377.5 billion ($356 million). Its total assets fell by W2.2 trillion from the previous quarter to W367.7 trillion. KEB continues to operate as a separate banking unit alongside Hana Bank.


IBK’s exit from Shinsegae was said to be more opportunistic and this was supposedly not a block that the market had been expecting. But with the consumer sector being a key beneficiary of Korea’s improved economic outlook and the renewed interest in Korean stocks, there was quite a lot of interest in the department store operator.

IBK offered 331,805 shares at a price between W252,500 and W261,000, which worked out as a discount of 3.0% to 6.1% versus Tuesday’s closing price of W269,000.

With enough demand to cover the deal more than twice over, the price was fixed at the top for a 3% discount. The shares on offer accounted for 3.4% of the company and about 10 days of trading.

A separate source said the deal attracted more than 50 investors, although a number of them ended up getting no shares at all. Still, the broad demand from international and domestic investors helped to move the price to the top of the range.

The order book was kept open for a few existing shareholders in the US, but the source said that in the end there were no significant or sizeable order from the US.

Shinsegae’s share price has rallied 35.5% since August 28 and is up 50% since the beginning of the year. Tuesday’s close of W269,000 is the highest closing level since February 2012.

¬ Haymarket Media Limited. All rights reserved.
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