Temasek sells most of Seoul Semiconductor stake

Ion Investment, a portfolio company of the Singaporean investment fund, put 4.1 million shares up in a block trade, raising $174.7 million.

Temasek has sold most of its stake in Seoul Semiconductor in an accelerated block trade worth $174.7 million, according to a term sheet.

Ion Investment, a portfolio company under the Singaporean investment fund, held 6.9 million shares in the Korean semiconductor company since 2009 but put 4.1 million shares up in a block trade at an initial price range of 45,000 won to 45,950 won ($42-$42.89), a 2.1% - 0% discount to the last closing price of 45,950 won.

The final offer priced at 45,600 won early Tuesday, a 0.8% discount to the last closing price on March 3. After the sale, Seoul Semiconductor shares jumped 3.3%, closing on Tuesday at 47,148 won. The shares are up 16.6% year-to-date to March 4.

“[Seoul Semiconductor] is above the price Temasek bought in. They’re in the money and are continuing to reshuffle from some sectors into to others,” one banker close to the deal told FinanceAsia on the Singaporean fund’s reasons for selling.

Long-only institutional investors were the primary buyers of shares, a second banker close to the deal said, although he noted there was also decent hedge fund interest. “There was an international bias but there were some locals with sizeable bids as well. The top five accounts accounted for 70% of the allocation, so the book was tight,” the second banker said. “The final book was multiple times covered at a 0% discount. It’s a good sign.”

The level of demand was surprising, as most markets were down on Monday – the Hang Seng Index fell 0.5% while the Nikkei 255 was down 1.2%, with bankers pointing to the ongoing crisis in Ukraine as the culprit.

“That’s the challenging thing about launching [a block] with markets doing what they’re doing, with Ukraine and everything,” the first banker said. “That said, we launched with a large part of the transaction covered. Some were existing shareholders who want to go long Korea.”

Investors appeared to brush off any market volatility concerns.

“I don’t think they got the memo,” said the second banker, referring to Ukraine. “[The company] is up 3% now from its placement price, which is quite good. The big orders in the book were long-only. We didn’t expect it to price quite so tight.”

Seoul Semiconductor is one of the world’s largest light-emitting diode (LED) manufacturers, and may stand to benefit from increased smartphone and tablet production globally. The company also produces LED lights for street lights, automobiles and other applications.

“It’s a very high quality LED [company] at a time when LED is getting more traction from a commercial perspective, what with smartphones and so on,” the first banker said. “There’s increased interest in the sector for sure.”

Global demand for LED lighting products – including spot lights, LED luminaires, street lights, LED light bulbs and florescent tubes – will reach 90 million in 2016, increasing total LED light penetration to 26% in 2016, up from 5% in 2012, according to NPD DisplaySearch. The increase is due to continued growth in commercial applications, government incentive programmes and consumer demand for energy-saving technology, the report said.

In terms of consumption, Japan has been the largest market for LED lighting applications since 2011, and NPD DisplaySearch expects this will continue to 2016, driven by increased adoption of LED bulbs, spot lights, fluorescent tubes and luminaires.

Investors also appear keen to add exposure to Korea. The country has been able to generate respectable GDP growth rates despite already being a wealthy country – 1.7% on average every year since 1970 – and it has overtaken Japan as the global centre of the liquid-crystal display (LCD) universe.

UBS and Credit Suisse acted as joint bookrunners on the deal.  

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