The Korean government executed a $353 million placement in the Industrial Bank of Korea (IBK) slightly later than expected on Friday afternoon.
A 28 million share equity deal was initially launched after Thursday's close at a fixed price of W13,000 - a 4.8% discount to the stock's W13,650 close.
Strong demand led the issuer to lift the offering size to $353 million — it was initially marketed at $242 million — and boost the number of shares to 28 million from 19.23 million, according to a term sheet seen by FinanceAsia.
Although launched on Thursday night, the deal was not finalised until Friday afternoon, due to documentation delays and Korean regulation — issuers must either cross shares at the pre-market open, or post-market close.
The accelerated placement missed the pre-open window and therefore had to wait until the afternoon, bankers close to the deal told FinanceAsia.
About 60% of the deal was allocated during the wall-cross process under the lead management of Bank of America Merrill Lynch, JP Morgan, Korea Investment & Securities and Samsung Securities. The institutional tranche was two times oversubscribed by the time books closed Friday.
Some 129 institutions participated in the deal, roughly half making up the international tranche, the majority of them hedge funds and long-only institutional investors predominately located in Asia. Korean sovereign wealth funds and institutions made up the remainder of the book.
The deal was timed to take advantage of a share price spike in IBK, which ran up 5.4% in the four trading days to Thursday. It then slipped 3.66% on Friday when traders knew the deal was live. Year-to-date, the stock is up 8.2%, outperforming the Kospi, which is up just 0.4% over the same period.
The transaction represented 23 days trading volume and brings the government’s stake to 55%, down from 60%. Last year, the Ministry of Strategy and Finance said it intended to reduce its stake in the policy bank to 50% and one share.
It got the ball rolling last November with a $250 million divestment, which was priced at a 5% discount to the then spot close of 12,000 won. IBK was then back in the market with a primary share deal of its own in April, raising $298.4 million with a deal that priced at a 4.45% discount to a spot close of 11,390 won.
At current levels, IBK is trading at 8.23 times 2014 earnings and 0.55 times book value, according to Bloomberg data. This puts it close to its historical average relative to bigger comparables like Kookim Bank.
Korea’s largest bank trades under its holding company, KB Financial, and has seen its share price slide thanks to a data theft scandal earlier this year. This led to a three-month ban on some of its credit card operations in mid-February.
As a result, KB Financial has traded down 15% year-to-date, although the stock has shown signs of recovery since mid-June and is currently bid at 0.77 times 2014 book value.
Analysts say IBK’s positive share price performance has been driven by improving net interest margins and cost controls.