Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

Event-Driven

<ul>
<li>The declining appeal of the separator business prompts SK to seek buyers for SKIET through block deals amid financial pressures. The first deal is anticipated despite recent stock price drops.</li>
<li>SK Ecoplant looks to sell its 37.6% stake in SK Oceanplant. Negotiations stall over the former major shareholder's 20% stake, prompting consideration of a block deal.</li>
<li>SK Bioscience, under SK Discovery, faces possible sale amid SK's bio company reshuffle. SK Chemicals may bring SK Biopharm under its wing to help SK Inc focus on semiconductors/batteries.</li>
</ul>


The declining appeal of the separator business prompts SK to seek buyers for SKIET through block deals amid financial pressures. The first deal is anticipated despite recent stock price drops.
SK Ecoplant looks to sell its 37.6% stake in SK Oceanplant. Negotiations stall over the former major shareholder's 20% stake, prompting consideration of a block deal.
SK Bioscience, under SK Discovery, faces possible sale amid SK's bio company reshuffle. SK Chemicals may bring SK Biopharm under its wing to help SK Inc focus on semiconductors/batteries.


Block Deal Prospects Arising from SK Group's Corporate Reshuffle

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<ul>
<li>In a recent discussion with a client, one of the questions that was raised was regarding the impact the local investors are having on the corporate governance reforms in Korea.</li>
<li>The number of local investors in the Korean stock market has jumped in the past few years from 5.3 million in 2017 to 14.4 million in 2022.</li>
<li>All in all, I think Korea is about 3-5 years behind Japan in various corporate governance reforms. So it has a lot of catching up to do.</li>
</ul>


In a recent discussion with a client, one of the questions that was raised was regarding the impact the local investors are having on the corporate governance reforms in Korea.
The number of local investors in the Korean stock market has jumped in the past few years from 5.3 million in 2017 to 14.4 million in 2022.
All in all, I think Korea is about 3-5 years behind Japan in various corporate governance reforms. So it has a lot of catching up to do.


Locals Driving Corporate Reforms and 10 Korean Companies Recently Announcing Share Cancellations

<ul>
<li>SKC Co Ltd (011790 KS) announced on 29 April that it plans to change into an intermediate holding company.</li>
<li>We believe that the formation of an intermediate holding company structure could have a negative impact on SKC's share price. </li>
<li>This is because some investors may be concerned that SKC may try to complete IPOs of some of its valuable subsidiaries including SKCFT Holdings without adequate protection for SKC shareholders.</li>
</ul>


SKC Co Ltd (011790 KS) announced on 29 April that it plans to change into an intermediate holding company.
We believe that the formation of an intermediate holding company structure could have a negative impact on SKC's share price. 
This is because some investors may be concerned that SKC may try to complete IPOs of some of its valuable subsidiaries including SKCFT Holdings without adequate protection for SKC shareholders.


SKC Co: Formation of an Intermediate Holding Company

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

<ul>
<li>On Friday morning, <a href="https://www.smartkarma.com/entities/sk-discovery-co-ltd" target="_blank" data-smartkarma-citation="entities:5181:1" rel="noopener">Sk Discovery (006120 KS)</a>, current owner/controller of 36.56% of <a href="https://www.smartkarma.com/entities/sk-chemicals-co-ltd-new" target="_blank" data-smartkarma-citation="entities:26190:1" rel="noopener">Sk Chemicals Co Ltd/New (285130 KS)</a> announced an opportunistic Partial Offer to buy 5.22% more at KRW 108,800/share.</li>
<li>The stated purpose in the <a href="https://kind.krx.co.kr/common/disclsviewer.do?method=search&amp;acptno=20220902000019&amp;docno=&amp;viewerhost=&amp;viewerport=" target="_blank" rel="noopener">Tender Offer Announcement</a> is "Stability of Management Rights." This will get SK Discovery to 41.77%, permitting consolidation of SK Chemicals.</li>
<li>
<em><strong>The real reason?</strong></em>SK Chemicals shares are trading at less than one-third the value of the <a href="https://www.smartkarma.com/entities/sk-bioscience-co-ltd" target="_blank" data-smartkarma-citation="entities:31484:1" rel="noopener">SK Bioscience (302440 KS)</a> shares they hold (with net cash and others free).</li>
</ul>


On Friday morning, Sk Discovery (006120 KS), current owner/controller of 36.56% of Sk Chemicals Co Ltd/New (285130 KS) announced an opportunistic Partial Offer to buy 5.22% more at KRW 108,800/share.
The stated purpose in the Tender Offer Announcement is "Stability of Management Rights." This will get SK Discovery to 41.77%, permitting consolidation of SK Chemicals.

The real reason?SK Chemicals shares are trading at less than one-third the value of the SK Bioscience (302440 KS) shares they hold (with net cash and others free).


SK Discovery Launches Opportunistic Partial Tender on SK Chemicals To Buy SK Bio CHEAP

<ul>
<li>This is a cash offer. So, there is no stock swap arbitrage here. To participate in this tender, we must buy SK Chemicals shares by the 19th.</li>
<li>We have proration risk. Discovery will buy on a pro-rata basis if exceeding the target volume. So, we could be at a loss.</li>
<li>This is an over-the-counter transaction. So both STT and CGT apply. The STT rate is 0.43% of the tendered amount and we have a 22% CGT rate for the profit.</li>
</ul>


This is a cash offer. So, there is no stock swap arbitrage here. To participate in this tender, we must buy SK Chemicals shares by the 19th.
We have proration risk. Discovery will buy on a pro-rata basis if exceeding the target volume. So, we could be at a loss.
This is an over-the-counter transaction. So both STT and CGT apply. The STT rate is 0.43% of the tendered amount and we have a 22% CGT rate for the profit.


SK Chemicals Cash Offer: Complete Details

South Korea

Huchems Fine Chemical Corp. develops and provides fine chemical products. The main products include polyurethane, ammonium nitrate, nitric acid, and ammonia.

Korea Petrochemical Ind Co., Ltd. manufactures chemical products such as high density polyethylene and polypropylene.  The Company also produces basic organic chemicals including ethylene, propylene, and mixed C4s.  Korea Petrochemical supplies its products to the industrial and home appliances, film, pipe, toy, electric wire, and medical instrument manufacturers.

Foosung Co., Ltd. manufactures and sells chemical compounds and also car accessories such as car mats.

Chunbo Co.,Ltd manufactures and sells chemical materials. The Company produces and sells display, semiconductor, and secondary battery application materials, as well as pharmaceutical intermediates and specialty chemicals. Chunbo markets its products worldwide.

Cosmochemical Co., Ltd. manufactures and markets titanium dioxide used in synthetic resins, rubber, paper, paint, and TV cathode-ray tubes.  The Company also produces titanium dioxide byproducts, ferrous sulfate, koferis, ferosol for wastewater treatment agent uses, and sports equipment.

Taekwang Industrial Co., Ltd. manufactures synthetic yarns, petrochemical products, and textiles.  The Company's products include acrylic yarns, nylons, spandex, carbon fibers, spun yarns, polyester materials, and blankets.  Taekwang also produces electric equipment, such as audio equipment, and cordless telephones.  In addition, The Company operates real estate business.

PI Advanced Materials Co., Ltd. manufactures and sells plastics films. The Company produces and sells polyimide films and other products. PI Advanced Materials conducts businesses in South Korea.

Unid Co., Ltd. manufactures and sells chemicals and timber products.  The Company's chemicals include potassium carbonate, hydrochloric acid, and caustic potash.  Unid also produces board and timber products, such as medium density fiberboard (MDF) and timber boards and formalin for construction uses.

Hankuk Carbon Co., Ltd. develops, produces, and sells carbon products. The Company manufactures LNG panelling, sporting goods, aircraft parts, glass paper and other related carbon products. Hankuk Carbon offers its products to customers in Southeast Asia and Europe.

Aekyung Chemical Co., Ltd manufactures basic organic chemicals such as pht halic anhydride and plasticizers. The Company also produces maleic anhydride, itaconic acid, polyol and bio-diesel. Aekyung Chemical markets its products primarily throughout Korea with limited overseas.

USI Corporation manufactures and markets polyethylene resins, a raw material used in the manufacture of plastic. The Company's products are low density polyethylene (LDPE), ethylene vinyl acetate copolymers (EVA), high density polyethylene (HDPE), and linear low density polyethylene (LLDPE).

Suzhou Kingswood Printing Ink Company Limited produces and sells offset printing inks, researches and develops modified polymer materials and vegetable oils for the production of printing inks. The Company's major products are environmentally friendly offset printing inks.

LSB Industries, Inc., through its subsidiaries, manufactures and sells chemical products for the mining, agricultural, and industrial markets.  The Company also manufactures and sells commercial and residential climate control products, as well as provides specialized engineering services and other activities.

Jiangsu Huifeng Agrochemical Co., Ltd. develops and produces chemical pesticide. The Company's products include prochloraz-manganese chloride, bromoxynial octanoate, ioxynil octanoate, and diflufenican.

Jiangsu Huifeng Agrochemical Co (002496 CH)

Oriental Union Chemical Corporation manufactures and markets chemicals. The Company produces ethylene glycol, ethylene oxide, ethylene gas, and diethylene glycol.

INEOS Styrolution India Limited manufactures ABS resins, ABS sheets and SAN resins. The Company's products are used in a wide range of industries, including personal care, consumer durables, automobiles and telecommunications. Styrolution ABS sells its products in India and abroad.

INEOS Styrolution India Limited (INEOS IN)

MEC COMPANY LTD. manufactures and markets chemicals and equipment for printed circuit boards.  The Company has sales/manufacturing subsidiaries in Taiwan, Hong Kong, Belgium, and US.

International CSRC Investment Holdings Co., Ltd. produces carbon black used for the manufacture of tire and other rubber products and operates a co-generation system to generate electricity and super heated steam.  The Company also manufactures pharmaceutical products and gelatin.

International CSRC Investment Holdings Co., Ltd. (2104 TT)

International CSRC Investment Holdings Co., Ltd.

Bharat Rasayan Ltd. manufactures and distributes pesticides and agrochemicals for crop protection and pharmaceutical intermediates. The Company has manufacturing facilities located throughout India.

ASAHI ORGANIC CHEMICALS INDUSTRY CO., LTD. produces polyvinyl chloride resin valves & pipes, phenol resin products, and resin-coated sand. The Company develops semiconductor-related products as well as housing-related products such as flooring materials.

SK Discovery Co.,Ltd. wholesales and distributes natural gas. The Company wholesales and distributes propylene, propane, and other natural gas SK Discovery markets its products throughout South Korea.

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Sk Discovery (006120 KS)

Block Deal Prospects Arising from SK Group's Corporate Reshuffle

SK Group seems to have chosen a block deal of SK Innovation's stake in SKIET as the first step to improve SK On's financial structure. SK...

Sanghyun Park

SKC Co: Formation of an Intermediate Holding Company

This insight provides additional details of SKC which has announced highly aggressive investment plans to expand its rechargeable batteries and...

Douglas Kim

SK Discovery Launches Opportunistic Partial Tender on SK Chemicals To Buy SK Bio CHEAP

SK Discovery has launched an opportunistic Offer to buy 5.2% of SK Chem to go >40+%. A small premium to recent but only a 12-week high... ish......

Travis Lundy

SK Chemicals Cash Offer: Complete Details

This post provides complete details about SK Discovery's cash offer to the shareholders of SK Chemicals and discusses trading angles on this event.

Sanghyun Park

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Block Deal Prospects Arising from SK Group's Corporate Reshuffle

SK Group seems to have chosen a block deal of SK Innovation's stake in SKIET as the first step to improve SK On's financial structure. SK...

Sanghyun Park

Locals Driving Corporate Reforms and 10 Korean Companies Recently Announcing Share Cancellations

On 17 April, Celltrion Inc announced that it will buyback shares worth 75 billion won. Including 75 billion won of share repurchase last month,...

Douglas Kim

SKC Co: Formation of an Intermediate Holding Company

This insight provides additional details of SKC which has announced highly aggressive investment plans to expand its rechargeable batteries and...

Douglas Kim

SK Discovery Launches Opportunistic Partial Tender on SK Chemicals To Buy SK Bio CHEAP

SK Discovery has launched an opportunistic Offer to buy 5.2% of SK Chem to go >40+%. A small premium to recent but only a 12-week high... ish......

Travis Lundy

SK Chemicals Cash Offer: Complete Details

This post provides complete details about SK Discovery's cash offer to the shareholders of SK Chemicals and discusses trading angles on this event.

Sanghyun Park