Korea's Youngone launches $130 million GDR offering

The OEM manufacturer of garments opened the order books yesterday for what is set to be the first equity deal of size in Korea this year.
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Youngone's Seoul headquarters
<div style="text-align: left;"> Youngone's Seoul headquarters </div>

Youngone Corp, a Seoul-headquartered original equipment manufacturer (OEM) of garments, opened the order books yesterday for its debut offering of global depository receipts (GDRs) that could raise about $120 million to $130 million, a source said yesterday.

The deal is set to be the first equity deal of size this year in Korea, where the biggest straight equity deal so far has been a $50 million follow-on by Hansol Technics, according to Dealogic.

Youngone, which makes outdoor sportswear, shoes and backpacks for the likes of Nike and North Face, plans to use the proceeds mainly for capital expenditures, for the expansion of manufacturing facilities at different overseas sites, and for general corporate purposes, the source said.

Youngone has manufacturing bases around the world, including in Bangladesh, China, Vietnam and El Salvador.

The roadshow started in Hong Kong yesterday, and will take the management to Singapore today and to London on Wednesday. The timetable is not fixed, but the books are expected to close no later than tomorrow (January 30).

The company will issue 3.5 million GDRs and could raise roughly $120 million to $130 million, depending on the final price, the source said. The offering size represents about 8.6% of the existing share capital. GDRs will be listed in Singapore.

There is no price range for the transaction as the deal is carried out against a live market. The final price will be set at a discount of up to 10% to a reference price that is equal to the volume-weighted average price for a three-day period ending two days before the pricing.

Youngone’s stock ended yesterday’s trading down 1.6% at W37,350, bringing its year-to-date gain to about 13%. The Kospi Index, which was down 0.4% yesterday, has slipped 2.9% since the start of the year.

Credit Suisse is the sole bookrunner for the GDR offering.

After Youngone announced the proposed offering on January 16, KDB Daewoo Securities said in a report that it maintains its “buy” rating on the company due to its sound fundamentals. But it lowered its target price to W40,000, from W44,000, to reflect the expected share dilution from the GDR offering, as well as a downward revision to the 2013 earnings forecasts due to an expected appreciation of the Korean won. The report added that by listing GDRs in Singapore, the stock can be free from overhang issues that tend to arise after a rights offering.

The brokerage said it believes that Youngone will grow alongside other international labels — it is the largest international outdoor-apparel OEM — and projected that its US dollar-denominated revenues will grow at a compound annual growth rate of 14.4% until the end of 2015, aided by strong competitiveness.

The ECM volume in Korea stood at $8.4 billion last year, a decline from $17.5 billion in 2011, according to Dealogic. So far this year, there have been 10 ECM transactions in the country, totalling $492 million, including Lotte Shopping’s $303 million exchangeable bond.

¬ Haymarket Media Limited. All rights reserved.

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