Jinro delays IPO and lowers price range

Jinro delays its offering in order to add information to its prospectus, while the international bookbuilding reveals that the indicated price range was too high.

In a surprising development, South Korean soju producer Jinro yesterday decided to postpone its initial public offering by a couple of weeks, to allow it to make some updates to it listing documents, according to a source. When the deal returns to the market in October, it will also have a slightly lower indicative price range.

The company had already completed its two-day international bookbuilding on Monday and Tuesday this week and was set to announce the final price yesterday. People familiar with the offering said the deal wasn't covered within the original price range, but there was enough demand to price it slightly below the range and, since that is possible on Korean IPOs, the deal would have gotten done.

Indeed, the source said the delay had nothing to with the demand or price. Rather, the company needed to include some additional information in the prospectus that it hadn't previously disclosed to potential IPO investors. The information in question, which was said to concern its dividend policy and a share buy-back plan, was brought to the attention of the Korean regulators after Jinro supposedly mentioned it in communication with some Korean parties.

Jinro was initially looking to raise up to W864 billion ($708 million) from the sale of 14.4 million shares, of which 30% has been earmarked for international investors. All the shares on offer are secondary. Most of them - a combined 13.6 million shares - will be sold by The Korea Teachers' Credit Union and The Military Mutual Aid Association , which will both divest their entire holdings in Jinro. The remaining 833,988 shares will be sold by Jinro's controlling shareholder Hite Holdings, which will still hold 53.5% after the IPO.

However, according to the listing document, the number of shares on offer may be reduced by 20% depending on the result from the bookbuilding, which could alter those numbers slightly.

Hite, a Korean beer maker previously known as Hite Brewery, bought Jinro in 2005 for $3.3 billion from a group of foreign creditors, including Goldman Sachs, Morgan Stanley and Deutsche Bank, which had taken control of the company in the wake of the Asian financial crisis. The teachers union and the military pension fund were part of a nine-strong consortium that came in to support the Hite bid by providing part of the funding.

Jinro was delisted in 2003 after failing to meet minimum financial requirements and its return to the Korean Stock Exchange through this IPO would be the final proof of its successful restructuring under the Hite ownership.

The IPO shares were offered in a range between W54,000 and W60,000. As per Korean regulations, that range was set before the bookrunners had had any feedback from investors, however, and during the roadshow, it apparently emerged that the price was too high.

The range will now be lowered to between W45,000 and W50,000, which will result in a total deal size between W648 billion and W720 billion ($537 million to $597 million). According to the source, it would have been possible to complete the international tranche within the new range based on the orders received during the bookbuilding earlier this week.

Jinro is South Korea's largest producer of distilled alcoholic beverages. It specialises in soju, a white spirit similar in taste to vodka that is widely regarded as Korea's national drink, and in 2008, produced 51.4% of all soju products sold in the country. It also makes mineral water and fruit wines.

Samsung Securities and UBS are joint international placement coordinators, while the domestic offering is led by Samsung and Woori Investment & Securities.

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