JPMorgan has priced the first international GDR out of Korea in 2003. However, its $28 million offering for Kumgang Korea Chemical is not about to break any volume records.
The deal was two times covered and was priced at $15.68, a 4% discount to close. Distribution split 40% US, 40% Asia and the remainder to Europe. Launched in the middle of the SARS outbreak, roadshows were curtailed. The management of the company was flown straight from Korea to LA and videoconference calls were done with fund managers in Hong Kong and Singapore from the US.
The company is a Korean market leader in paints and building products and is popular with major institutional investors such as Capital and Fidelity - with foreign institutions owning about 40% of the company.
The timing of the GDR may strike some as strange. In fact, it is a legacy of a merger done in 2000 in which the company acquired Korea Chemical and was forced to buy back 13.1% of the company from dissenting shareholders and hold it as treasury stock. Regulations state that it must liquidate this treasury stock by the end of this month.
Accordingly, the company has already cancelled 6.5% of this stock - a move welcomed by institutional investors. It will sell 3.4% of the treasury stock in the domestic market, and the JPMorgan GDR represents a further 3.2%. Post-cancellation, KCC will have 10.52 million shares versus 11.25 million previously. It has a market capitalization of around $935 million.
The stock was up 5% at the end of trading yesterday.