Samsung SDS raised $1.1 billion in an initial public offering after selling its shares at the top of the indicative range, making it the largest Korean IPO in more than four years.
The listing of Samsung SDS, which provides technology for the construction and manufacturing industries, is the latest step in allowing Lee Jae Yong, heir apparent of the Samsung Group, to restructure South Korea's largest business group after his 72-year-old father was hospitalised in May.
The entire deal was secondary, with Samsung Electro-Mechanics selling off all of the 6.09 million shares at W190,000 per unit, the top of the initial W150,000 to W190,000 range. The shares represent 7.88% of enlarged share capital. Goldman Sachs and Korea Investment & Securities were joint lead managers, while JP Morgan also helped arrange the sale.
Demand was strong for the Korean conglomerate, with bankers noting long-only international participation was particularly robust. More than 150 institutions placed $12 billion worth of orders, leaving the international tranche 45 times oversubscribed.
More than two-thirds of the book was allocated to long-only institutional investors, with the top ten investors accounting for 40% of the book, bankers told FinanceAsia. There were a few hedge funds that received allocations, but the bulk of the orders came from long-onlys.
Roughly 60% of the deal, or 3.6 million shares, were made available to domestic and international institutions, while 20% was allocated to the domestic retail tranche and another 20% for the employee share buyback programme.
It is the largest IPO in Korea since Samsung Life Insurance’s $4 billion IPO in April 2010.
At W190,000 per share, Samsung SDS now has a valuation of 25.8 times its 2015 earnings and 10.7 times on an Ebitda basis. This puts Samsung SDS at a premium to its peers, which include Posco ICT, which is trading at 16 times 2015 earnings, and IT services firm SK C&C, which is trading at 22.4 times its 2015 earnings.
Samsung Group has a diverse range of businesses spanning televisions and smartphones to insurance and construction. It is in the process of restructuring its entire business to ensure heir apparent Lee retains control of the company.
Upon taking over Samsung Group, Lee’s three heirs reportedly face inheritance taxes that could exceed $5 billion of their father’s $11.2 billion fortune. The IPO of Samsung SDS is widely believed to help Lee pay down the inheritance tax on assets passed down by his father.
There is also reportedly political pressure to unwind the shareholders that allow the Lee family to maintain control of 70 companies with less than a 2% stake.
Samsung Heavy Industries, one of the world’s largest ship-markers, and Samsung Engineering, will merge before the end of the year in a deal valued at about W2.5 trillion.
Samsung will also gauge investor interest next week on Cheil Industries, a theme park operator, which could raise as much as W2.68 trillion in a separate IPO. Cheil, formerly known as Samsung Everland, announced plans in June to go public. Citi, JP Morgan, Daewoo Securities and Woori Investment & Securities will be handling this share sale, which will sell shares between W45,000 and W53,000 per unit.