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

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Event-Driven

<p>We are getting closer to the 3 day swap price determination period for <a href="https://www.smartkarma.com/entities/5181" target="_blank" data-smartkarma-citation="entities:5181:1">SK Discovery Co Ltd (006120 KS)</a>, which is Mar 19-21.</p><div><table class="table table-striped"><tbody><tr><td colspan="2" style="width: 714px;">Upcoming event schedule</td></tr><tr><td style="width: 385px;"><strong><em>3 day swap price determination period for SK Discovery</em></strong></td><td style="text-align: right; width: 329px;"><strong><em>Mar 19 - 21</em></strong></td></tr><tr><td style="width: 385px;"><strong><em>Tendering period</em></strong></td><td style="text-align: right; width: 329px;"><strong><em>Mar 26 - Apr 16</em></strong></td></tr><tr><td style="width: 385px;">Settlement (payment)</td><td style="text-align: right; width: 329px;">Apr 18</td></tr><tr><td style="width: 385px;">Allocation</td><td style="text-align: right; width: 329px;">Apr 27</td></tr><tr><td style="width: 385px;">Listing</td><td style="text-align: right; width: 329px;">Apr 30</td></tr><tr><td style="width: 385px;">Banker</td><td style="text-align: right; width: 329px;"><a href="https://www.smartkarma.com/entities/18790" target="_blank" data-smartkarma-citation="entities:18790:1">NH Investment &amp; Securities Co Ltd (005940 KS)</a></td></tr><tr><td colspan="2" style="width: 714px;"><em>Source: KIND</em></td></tr></tbody></table></div><p>Remember? The swap price for <a href="https://www.smartkarma.com/entities/26190" target="_blank" data-smartkarma-citation="entities:26190:1">SK Chemicals Co Ltd/New (285130 KS)</a> was finalized at ₩110,701 with a target offering qty. of 3.5M shares. SK Discovery targets a total of 3,500,000 SK Chemicals shares at the swap price of ₩110,701. Just, SK Discovery's swap price is yet to be determined based on the 3 day VWAP on Mar 19-21.</p><div><table class="table table-striped"><tbody><tr><td colspan="2">Swap price/qty. determination</td></tr><tr><td>Swap price for SK Chemicals</td><td style="text-align: right;">₩110,701</td></tr><tr><td>Target qty. of SK Chemicals shares to be swapped</td><td style="text-align: right;">3,500,000 shares</td></tr><tr><td><strong><em>Swap price for SK Discovery</em></strong></td><td style="text-align: right;"><em><strong>To be determined based on the 3 day VWAP on Mar 19-21</strong></em></td></tr><tr><td><strong><em>Target qty. of SK Discovery shares to be swapped</em></strong></td><td style="text-align: right;"><em><strong>(₩110,701 × 3,500,000 shares) / SK Discovery swap price</strong></em></td></tr><tr><td colspan="2"><em>Source: KIND</em></td></tr></tbody></table></div><p>Well, it is no secret that the major shareholder (in this case, the guy named Chey Chang-won who is the younger cousin of the SK Group chairman Chey Tae-won) wants stronger prices for SK Chemicals and weaker prices for SK Discovery until we head to this Mar 19-21 price determination period for SK Discovery. It is so obvious that Chey Chang-won needs to have as much SK Discovery stake as possible. For this, the larger the price spread between these two companies, the better it is for Chey. </p><div><table class="table table-striped"><tbody><tr><td colspan="3">SK Discovery (common) shareholding structure</td></tr><tr><td>Chey Chang-won</td><td style="text-align: right;">1,992,293 shares</td><td style="text-align: right;">18.47%</td></tr><tr><td>His special affiliate persons</td><td style="text-align: right;">426,643 shares</td><td style="text-align: right;">3.96%</td></tr><tr><td><em><strong>Total owned by the major shareholders</strong></em></td><td style="text-align: right;"><em><strong>2,418,936 shares</strong></em></td><td style="text-align: right;"><em><strong>22.43%</strong></em></td></tr><tr><td colspan="3"><em>Source: FnGuide</em></td></tr></tbody></table></div><div><table class="table table-striped"><tbody><tr><td colspan="3">SK Chemicals (common) shareholding structure</td></tr><tr><td>Chey Chang-won</td><td style="text-align: right;">2,139,266 shares</td><td style="text-align: right;">18.47%</td></tr><tr><td>His special affiliate persons</td><td style="text-align: right;">456,315 shares</td><td style="text-align: right;">3.94%</td></tr><tr><td><em><strong>Total owned by the major shareholders</strong></em></td><td style="text-align: right;"><em><strong>2,595,581 shares</strong></em></td><td style="text-align: right;"><em><strong>22.41%</strong></em></td></tr><tr><td colspan="3"><em>Source: FnGuide</em></td></tr></tbody></table></div><p>Lucky for Chey (or probably thanks to his carefully devised and executed plan), SK Discovery share price just kept going south. At the SK Chemicals' finalized swap price of ₩110,701, SK Discovery's current price (as of Mar 12) gives a swap ratio of 2.55661. This is a 12.47% increase from one month ago (2.27312 on Feb 12) and a 13.89% increase from the tentatively set swap ratio of 2.24473.</p><table class="table table-striped"><tbody><tr><td>Date</td><td style="text-align: right;">SK Discovery closing price (₩)</td><td style="text-align: right;">SK Discovery market cap (₩ mil)</td><td style="text-align: right;">SK Chemicals closing price (₩)</td><td style="text-align: right;">SK Chemicals market cap (₩ mil)</td><td style="text-align: right;">Swap ratio</td></tr><tr><td><em><strong>2018/03/12</strong></em></td><td style="text-align: right;"><em><strong>43,300</strong></em></td><td style="text-align: right;"><em><strong>466,959</strong></em></td><td style="text-align: right;"><em><strong>109,500</strong></em></td><td style="text-align: right;"><em><strong>1,267,994</strong></em></td><td style="text-align: right;"><em><strong>2.55661</strong></em></td></tr><tr><td>2018/03/09</td><td style="text-align: right;">43,850</td><td style="text-align: right;">472,891</td><td style="text-align: right;">109,000</td><td style="text-align: right;">1,262,204</td><td style="text-align: right;">2.52454</td></tr><tr><td>2018/03/08</td><td style="text-align: right;">43,400</td><td style="text-align: right;">468,038</td><td style="text-align: right;">109,000</td><td style="text-align: right;">1,262,204</td><td style="text-align: right;">2.55071</td></tr><tr><td>2018/03/07</td><td style="text-align: right;">42,100</td><td style="text-align: right;">454,018</td><td style="text-align: right;">106,000</td><td style="text-align: right;">1,227,464</td><td style="text-align: right;">2.62948</td></tr><tr><td>2018/03/06</td><td style="text-align: right;">42,950</td><td style="text-align: right;">463,185</td><td style="text-align: right;">105,000</td><td style="text-align: right;">1,215,884</td><td style="text-align: right;">2.57744</td></tr><tr><td>2018/03/05</td><td style="text-align: right;">43,700</td><td style="text-align: right;">471,273</td><td style="text-align: right;">104,500</td><td style="text-align: right;">1,210,095</td><td style="text-align: right;">2.53320</td></tr><tr><td>2018/03/02</td><td style="text-align: right;">43,800</td><td style="text-align: right;">472,352</td><td style="text-align: right;">106,500</td><td style="text-align: right;">1,233,254</td><td style="text-align: right;">2.52742</td></tr><tr><td>2018/02/28</td><td style="text-align: right;">45,000</td><td style="text-align: right;">485,293</td><td style="text-align: right;">109,000</td><td style="text-align: right;">1,262,204</td><td style="text-align: right;">2.46002</td></tr><tr><td>2018/02/27</td><td style="text-align: right;">46,400</td><td style="text-align: right;">500,391</td><td style="text-align: right;">109,000</td><td style="text-align: right;">1,262,204</td><td style="text-align: right;">2.38580</td></tr><tr><td>2018/02/26</td><td style="text-align: right;">47,000</td><td style="text-align: right;">506,861</td><td style="text-align: right;">110,000</td><td style="text-align: right;">1,273,784</td><td style="text-align: right;">2.35534</td></tr><tr><td>2018/02/23</td><td style="text-align: right;">48,250</td><td style="text-align: right;">520,342</td><td style="text-align: right;">113,500</td><td style="text-align: right;">1,314,313</td><td style="text-align: right;">2.29432</td></tr><tr><td>2018/02/22</td><td style="text-align: right;">48,250</td><td style="text-align: right;">520,342</td><td style="text-align: right;">111,000</td><td style="text-align: right;">1,285,364</td><td style="text-align: right;">2.29432</td></tr><tr><td>2018/02/21</td><td style="text-align: right;">49,050</td><td style="text-align: right;">528,969</td><td style="text-align: right;">113,000</td><td style="text-align: right;">1,308,523</td><td style="text-align: right;">2.25690</td></tr><tr><td>2018/02/20</td><td style="text-align: right;">48,900</td><td style="text-align: right;">527,351</td><td style="text-align: right;">109,500</td><td style="text-align: right;">1,267,994</td><td style="text-align: right;">2.26382</td></tr><tr><td>2018/02/19</td><td style="text-align: right;">49,550</td><td style="text-align: right;">534,361</td><td style="text-align: right;">109,500</td><td style="text-align: right;">1,267,994</td><td style="text-align: right;">2.23413</td></tr><tr><td>2018/02/14</td><td style="text-align: right;">49,150</td><td style="text-align: right;">530,048</td><td style="text-align: right;">105,000</td><td style="text-align: right;">1,215,884</td><td style="text-align: right;">2.25231</td></tr><tr><td>2018/02/13</td><td style="text-align: right;">49,100</td><td style="text-align: right;">529,508</td><td style="text-align: right;">107,000</td><td style="text-align: right;">1,239,044</td><td style="text-align: right;">2.25460</td></tr><tr><td>2018/02/12</td><td style="text-align: right;">48,700</td><td style="text-align: right;">525,195</td><td style="text-align: right;">103,000</td><td style="text-align: right;">1,192,725</td><td style="text-align: right;">2.27312</td></tr><tr><td colspan="6"><em>Source: KRX</em></td></tr></tbody></table><table class="table table-striped"><tbody><tr><td colspan="2" style="width: 715px;">Swap ratio trend</td></tr><tr><td style="width: 430.6px;"><em><strong>As of Mar 12</strong></em></td><td style="text-align: right; width: 284.4px;"><em><strong>2.55661</strong></em></td></tr><tr><td style="width: 430.6px;">As of Feb 12</td><td style="text-align: right; width: 284.4px;">2.27312</td></tr><tr><td style="width: 430.6px;"><em><strong> - Increase from Feb 12</strong></em></td><td style="text-align: right; width: 284.4px;"><em><strong>+12.47%</strong></em></td></tr><tr><td style="width: 430.6px;">Tentative swap ratio stated in the regulatory filing</td><td style="text-align: right; width: 284.4px;">2.24473</td></tr><tr><td style="width: 430.6px;"><em><strong> - Increase from the tentative set swap ratio</strong></em></td><td style="text-align: right; width: 284.4px;"><em><strong>+13.89%</strong></em></td></tr><tr><td colspan="2" style="width: 715px;"><em>Source: KRX, <a href="https://www.smartkarma.com/profiles/354" target="_blank" data-smartkarma-citation="accounts:354">Sanghyun Park</a></em></td></tr></tbody></table><p>Unlike the recent tender offer events in Korea, this SK Discovery-SK Chemicals' tender offer event really seems to be becoming a textbook case. So, if the major shareholders successfully tender all of their SK Chemicals shares, their post tender offer total shareholding in SK Discovery will likely amount to about 45.90%. This is an 1.37%p increase from Feb 22.</p><table class="table table-striped"><tbody><tr><td colspan="4" style="width: 710px;">Major shareholders' stake situation in SK Discovery post rights offering/tender offer</td></tr><tr><td style="width: 403px;"><em><strong>As of</strong></em></td><td style="text-align: right; width: 114.4px;"><em><strong>Feb 22</strong></em></td><td style="text-align: right; width: 118.6px;"><em><strong>Mar 12</strong></em></td><td style="text-align: right; width: 74px;"><em><strong>Note</strong></em></td></tr><tr><td style="width: 403px;">SK Discovery market cap</td><td style="text-align: right; width: 114.4px;">₩520.3bil</td><td style="text-align: right; width: 118.6px;">₩467.0bil</td><td style="text-align: right; width: 74px;">A</td></tr><tr><td style="width: 403px;">Major shareholders' stake in SK Discovery</td><td style="text-align: right; width: 114.4px;">22.43%</td><td style="text-align: right; width: 118.6px;">22.43%</td><td style="text-align: right; width: 74px;">B</td></tr><tr><td style="width: 403px;">Value of the major shareholders' stake in SK Discovery based on the market cap</td><td style="text-align: right; width: 114.4px;">₩116.7bil</td><td style="text-align: right; width: 118.6px;">₩104.7bil</td><td style="text-align: right; width: 74px;">C = A × B</td></tr><tr><td style="width: 403px;">Total offering amount (3,500,000 Chemicals shares at ₩110,701) </td><td style="text-align: right; width: 114.4px;">₩387.5bil</td><td style="text-align: right; width: 118.6px;">₩387.5bil</td><td style="text-align: right; width: 74px;">D</td></tr><tr><td style="width: 403px;">Major shareholders' stake in SK Chemicals</td><td style="text-align: right; width: 114.4px;"><p>22.43%</p><p>(2,597,383 shares)</p></td><td style="text-align: right; width: 118.6px;"><p>22.43%</p><p>(2,597,383 shares)</p></td><td style="text-align: right; width: 74px;">E</td></tr><tr><td style="width: 403px;">Value of the major shareholders' stake in SK Chemicals based on the swap price of ₩110,701</td><td style="text-align: right; width: 114.4px;">₩287.5bil</td><td style="text-align: right; width: 118.6px;">₩287.5bil</td><td style="text-align: right; width: 74px;">F = 2,597,383 shares × ₩110,701</td></tr><tr><td style="width: 403px;"><em><strong>Major shareholders's stake in SK Discovery if they successfully tender all of their Chemicals shares</strong></em></td><td style="text-align: right; width: 114.4px;"><em><strong>44.53%</strong></em></td><td style="text-align: right; width: 118.6px;"><em><strong>45.90%</strong></em></td><td style="text-align: right; width: 74px;"><em><strong>G = (C + F) / (A + D)</strong></em></td></tr><tr><td colspan="4" style="width: 710px;"><em>Source: KRX, KIND, <a href="https://www.smartkarma.com/profiles/354" target="_blank" data-smartkarma-citation="accounts:354">Sanghyun Park</a></em></td></tr></tbody></table>

We are getting closer to the 3 day swap price determination period for SK Discovery Co Ltd (006120 KS), which is Mar 19-21.Upcoming event schedule3 day swap price determination period for SK DiscoveryMar 19 - 21Tendering periodMar 26 - Apr 16Settlement (payment)Apr 18AllocationApr 27ListingApr 30BankerNH Investment &amp; Securities Co Ltd (005940 KS)Source: KINDRemember? The swap price for SK Chemicals Co Ltd/New (285130 KS) was finalized at ₩110,701 with a target offering qty. of 3.5M shares. SK Discovery targets a total of 3,500,000 SK Chemicals shares at the swap price of ₩110,701. Just, SK Discovery's swap price is yet to be determined based on the 3 day VWAP on Mar 19-21.Swap price/qty. determinationSwap price for SK Chemicals₩110,701Target qty. of SK Chemicals shares to be swapped3,500,000 sharesSwap price for SK DiscoveryTo be determined based on the 3 day VWAP on Mar 19-21Target qty. of SK Discovery shares to be swapped(₩110,701 × 3,500,000 shares) / SK Discovery swap priceSource: KINDWell, it is no secret that the major shareholder (in this case, the guy named Chey Chang-won who is the younger cousin of the SK Group chairman Chey Tae-won) wants stronger prices for SK Chemicals and weaker prices for SK Discovery until we head to this Mar 19-21 price determination period for SK Discovery. It is so obvious that Chey Chang-won needs to have as much SK Discovery stake as possible. For this, the larger the price spread between these two companies, the better it is for Chey. SK Discovery (common) shareholding structureChey Chang-won1,992,293 shares18.47%His special affiliate persons426,643 shares3.96%Total owned by the major shareholders2,418,936 shares22.43%Source: FnGuideSK Chemicals (common) shareholding structureChey Chang-won2,139,266 shares18.47%His special affiliate persons456,315 shares3.94%Total owned by the major shareholders2,595,581 shares22.41%Source: FnGuideLucky for Chey (or probably thanks to his carefully devised and executed plan), SK Discovery share price just kept going south. At the SK Chemicals' finalized swap price of ₩110,701, SK Discovery's current price (as of Mar 12) gives a swap ratio of 2.55661. This is a 12.47% increase from one month ago (2.27312 on Feb 12) and a 13.89% increase from the tentatively set swap ratio of 2.24473.DateSK Discovery closing price (₩)SK Discovery market cap (₩ mil)SK Chemicals closing price (₩)SK Chemicals market cap (₩ mil)Swap ratio2018/03/1243,300466,959109,5001,267,9942.556612018/03/0943,850472,891109,0001,262,2042.524542018/03/0843,400468,038109,0001,262,2042.550712018/03/0742,100454,018106,0001,227,4642.629482018/03/0642,950463,185105,0001,215,8842.577442018/03/0543,700471,273104,5001,210,0952.533202018/03/0243,800472,352106,5001,233,2542.527422018/02/2845,000485,293109,0001,262,2042.460022018/02/2746,400500,391109,0001,262,2042.385802018/02/2647,000506,861110,0001,273,7842.355342018/02/2348,250520,342113,5001,314,3132.294322018/02/2248,250520,342111,0001,285,3642.294322018/02/2149,050528,969113,0001,308,5232.256902018/02/2048,900527,351109,5001,267,9942.263822018/02/1949,550534,361109,5001,267,9942.234132018/02/1449,150530,048105,0001,215,8842.252312018/02/1349,100529,508107,0001,239,0442.254602018/02/1248,700525,195103,0001,192,7252.27312Source: KRXSwap ratio trendAs of Mar 122.55661As of Feb 122.27312 - Increase from Feb 12+12.47%Tentative swap ratio stated in the regulatory filing2.24473 - Increase from the tentative set swap ratio+13.89%Source: KRX, Sanghyun ParkUnlike the recent tender offer events in Korea, this SK Discovery-SK Chemicals' tender offer event really seems to be becoming a textbook case. So, if the major shareholders successfully tender all of their SK Chemicals shares, their post tender offer total shareholding in SK Discovery will likely amount to about 45.90%. This is an 1.37%p increase from Feb 22.Major shareholders' stake situation in SK Discovery post rights offering/tender offerAs ofFeb 22Mar 12NoteSK Discovery market cap₩520.3bil₩467.0bilAMajor shareholders' stake in SK Discovery22.43%22.43%BValue of the major shareholders' stake in SK Discovery based on the market cap₩116.7bil₩104.7bilC = A × BTotal offering amount (3,500,000 Chemicals shares at ₩110,701) ₩387.5bil₩387.5bilDMajor shareholders' stake in SK Chemicals22.43%(2,597,383 shares)22.43%(2,597,383 shares)EValue of the major shareholders' stake in SK Chemicals based on the swap price of ₩110,701₩287.5bil₩287.5bilF = 2,597,383 shares × ₩110,701Major shareholders's stake in SK Discovery if they successfully tender all of their Chemicals shares44.53%45.90%G = (C + F) / (A + D)Source: KRX, KIND, Sanghyun Park

SK Discovery & SK Chemicals Tender Offer - Arb Yield Calculations & Situation Update

<p>Everyone knew SK Discovery would do a tender offer to SK Chemicals shareholders to swap their SK Chemicals shares with the holdco shares. This is a must for the owner Chey Chang-won who has to increase his shareholding '<em>substantially</em>' from current 18.47% (22.43% if includes the stake owned by his special affiliate persons). Moreover, SK Chemicals should be placed under SK Discovery as a part of the holding company structure.</p><div><table class="table table-striped"><tbody><tr><td colspan="3">SK Discovery (common) shareholding structure</td></tr><tr><td>Chey Chang-won</td><td style="text-align: right;">1,992,293 shares</td><td style="text-align: right;">18.47%</td></tr><tr><td>His special affiliate persons</td><td style="text-align: right;">426,643 shares</td><td style="text-align: right;">3.96%</td></tr><tr><td><em><strong>Total owned by the major shareholders</strong></em></td><td style="text-align: right;"><em><strong>2,418,936 shares</strong></em></td><td style="text-align: right;"><em><strong>22.43%</strong></em></td></tr><tr><td colspan="3"><em>Source: FnGuide</em></td></tr></tbody></table></div><div><table class="table table-striped"><tbody><tr><td colspan="3">SK Chemicals (common) shareholding structure</td></tr><tr><td>Chey Chang-won</td><td style="text-align: right;">2,139,266 shares</td><td style="text-align: right;">18.47%</td></tr><tr><td>His special affiliate persons</td><td style="text-align: right;">456,315 shares</td><td style="text-align: right;">3.94%</td></tr><tr><td><em><strong>Total owned by the major shareholders</strong></em></td><td style="text-align: right;"><em><strong>2,595,581 shares</strong></em></td><td style="text-align: right;"><em><strong>22.41%</strong></em></td></tr><tr><td colspan="3"><em>Source: FnGuide</em></td></tr></tbody></table><hr><p>So, as very well expected, SK Discovery made a move. Just, they moved a bit late. Usually, we see this tender offer thing about a month after re-listing (Jan 5 in this case). So, I personally expected early Feb, but SK Discovery waited a little longer.</p><div class="content-highlight"><p><em>Here is the link of the regulatory filing about this. (Source: KIND)</em></p><p><em><a href="http://kind.krx.co.kr/common/disclsviewer.do?method=search&amp;acptno=20180222001109&amp;docno=&amp;viewerhost=&amp;viewerport=" target="_blank">http://kind.krx.co.kr/common/disclsviewer.do?method=search&amp;acptno=20180222001109&amp;docno=&amp;viewerhost=&amp;viewerport=</a></em></p></div><p><em><strong>Here is my own summary of this regulatory filing.</strong></em></p><p>First, the below swap price for SK Chemicals is the final one. SK Discovery targets a total of 3,500,000 SK Chemicals shares at the swap price of ₩110,701.</p><div><table class="table table-striped"><tbody><tr><td colspan="2"><a href="https://www.smartkarma.com/entities/26190" target="_blank" data-smartkarma-citation="entities:26190:1">SK Chemicals Co Ltd/New (285130 KS)</a></td></tr><tr><td>Closing price on the most recent trading day (Feb 21) (A)</td><td style="text-align: right;">₩113,000</td></tr><tr><td>1W VWAP (Feb 13-21) (B)</td><td style="text-align: right;">₩110,667</td></tr><tr><td>1-month average (Jan 22-Feb 21) (C)</td><td style="text-align: right;">₩108,438</td></tr><tr><td><em><strong>Arithmetic average (D=(A+B+C)/3)</strong></em></td><td style="text-align: right;"><em><strong>₩110,701</strong></em></td></tr><tr><td><em><strong>Swap price per share (E=Min(A,D))</strong></em></td><td style="text-align: right;"><em><strong>₩110,701</strong></em></td></tr><tr><td><strong><em>Target qty.</em></strong></td><td style="text-align: right;"><em><strong>3,500,000 shares</strong></em></td></tr><tr><td colspan="2"><em>Source: KIND</em></td></tr></tbody></table></div><p>Now, what is still to be finalized is SK Discovery's price per share to be swapped with SK Chemicals' shares.</p><div class="content-highlight"><p><em>In the regulatory filing, SK Discovery's price per share is tentatively set at ₩49,316, which is "tentatively" calculated based on the following formula.</em></p><p><em><strong>= VWAP from Feb 13 to 19 with no discount</strong></em></p></div><p>So, since this ₩49,316 is a tentative price, the number and amount of total new rights to be offered are also "tentative". It means all the numbers in the below table are just estimates.</p><div><table class="table table-striped"><tbody><tr><td>Item</td><td style="text-align: right;">Tentative</td><td style="text-align: right;">Final (to be finalized on Mar 21)</td></tr><tr><td><em><strong>"Tentative" price per share to be offered</strong></em></td><td style="text-align: right;"><em><strong>₩49,316</strong></em></td><td style="text-align: right;"><em><strong>???</strong></em></td></tr><tr><td><em><strong>"Tentative" number of new rights to be offered</strong></em></td><td style="text-align: right;"><em><strong>7,856,547 common shares</strong></em></td><td style="text-align: right;"><em><strong>???</strong></em></td></tr><tr><td><em><strong>"Tentative" amount of new rights to be offered</strong></em></td><td style="text-align: right;"><em><strong>₩387,453,471,852</strong></em></td><td style="text-align: right;"><em><strong>???</strong></em></td></tr><tr><td colspan="3"><em>Source: KIND</em></td></tr></tbody></table></div><p>Then, when will SK Discovery's swap price be finalized?</p><div class="content-highlight"><p><em> It will be finalized on Mar 21 based on the following formula. Discovery will then announce this final price via a regulatory filing on Mar 22.</em></p><p><em><strong>= VWAP from Mar 19 to 21 with no discount</strong></em></p></div><p>So, once we finalize Discovery's swap price on Mar 21,</p><div class="content-highlight"><p><em>then we will subsequently get a total number/amount of Discovery's new rights to be offered based on the following formula.</em></p><ul><li><em>A = Chemicals 3,500,000 shares x ₩110,701</em></li><li><em>B = Discovery's share price to be swapped</em></li><li><em>C = Number of Discovery shares to be offered = A / B</em></li><li><em>D = Amount of Discovery shares to be offered = C × D</em></li></ul></div><p>In the end, Discovery's shareholding structure will look like this.</p><div><table class="table table-striped"><tbody><tr><td colspan="2" style="width: 713px;">Discovery's shareholding structure post rights offering/tender offer</td></tr><tr><td style="width: 418.4px;"><em><strong>New rights offering</strong></em></td><td style="text-align: right; width: 294.6px;"><em><strong>7,856,547</strong></em></td></tr><tr><td style="width: 418.4px;">Current number of issued shares</td><td style="text-align: right; width: 294.6px;"><p>12,142,738</p><p>(Common: 10,784,283 / pref: 1,358,455)</p></td></tr><tr><td style="width: 418.4px;">Number of issued shares post rights offering/tender offer</td><td style="text-align: right; width: 294.6px;"><em><strong>19,999,285</strong></em></td></tr><tr><td colspan="2" style="width: 713px;"><em>Source: KIND</em></td></tr></tbody></table></div><p>Below is the schedule for the upcoming events that we do not want to miss.</p><div><table class="table table-striped"><tbody><tr><td colspan="2" style="width: 368.4px;">Upcoming event schedule</td></tr><tr><td style="width: 368.4px;">Board resolution</td><td style="width: 345.6px;">Feb 22</td></tr><tr><td style="width: 368.4px;">Subscription</td><td style="width: 345.6px;">Mar 26 - Apr 16</td></tr><tr><td style="width: 368.4px;">Settlement (payment)</td><td style="width: 345.6px;">Apr 18</td></tr><tr><td style="width: 368.4px;">Allocation</td><td style="width: 345.6px;">Apr 27</td></tr><tr><td style="width: 368.4px;">Listing</td><td style="width: 345.6px;">Apr 30</td></tr><tr><td style="width: 368.4px;">Banker</td><td style="width: 345.6px;"><a href="https://www.smartkarma.com/entities/18790" target="_blank" data-smartkarma-citation="entities:18790:1">NH Investment &amp; Securities Co Ltd (005940 KS)</a></td></tr><tr><td colspan="2" style="width: 714px;"><em>Source: KIND</em></td></tr></tbody></table></div></div>

Everyone knew SK Discovery would do a tender offer to SK Chemicals shareholders to swap their SK Chemicals shares with the holdco shares. This is a must for the owner Chey Chang-won who has to increase his shareholding 'substantially' from current 18.47% (22.43% if includes the stake owned by his special affiliate persons). Moreover, SK Chemicals should be placed under SK Discovery as a part of the holding company structure.SK Discovery (common) shareholding structureChey Chang-won1,992,293 shares18.47%His special affiliate persons426,643 shares3.96%Total owned by the major shareholders2,418,936 shares22.43%Source: FnGuideSK Chemicals (common) shareholding structureChey Chang-won2,139,266 shares18.47%His special affiliate persons456,315 shares3.94%Total owned by the major shareholders2,595,581 shares22.41%Source: FnGuideSo, as very well expected, SK Discovery made a move. Just, they moved a bit late. Usually, we see this tender offer thing about a month after re-listing (Jan 5 in this case). So, I personally expected early Feb, but SK Discovery waited a little longer.Here is the link of the regulatory filing about this. (Source: KIND)http://kind.krx.co.kr/common/disclsviewer.do?method=search&amp;acptno=20180222001109&amp;docno=&amp;viewerhost=&amp;viewerport=Here is my own summary of this regulatory filing.First, the below swap price for SK Chemicals is the final one. SK Discovery targets a total of 3,500,000 SK Chemicals shares at the swap price of ₩110,701.SK Chemicals Co Ltd/New (285130 KS)Closing price on the most recent trading day (Feb 21) (A)₩113,0001W VWAP (Feb 13-21) (B)₩110,6671-month average (Jan 22-Feb 21) (C)₩108,438Arithmetic average (D=(A+B+C)/3)₩110,701Swap price per share (E=Min(A,D))₩110,701Target qty.3,500,000 sharesSource: KINDNow, what is still to be finalized is SK Discovery's price per share to be swapped with SK Chemicals' shares.In the regulatory filing, SK Discovery's price per share is tentatively set at ₩49,316, which is "tentatively" calculated based on the following formula.= VWAP from Feb 13 to 19 with no discountSo, since this ₩49,316 is a tentative price, the number and amount of total new rights to be offered are also "tentative". It means all the numbers in the below table are just estimates.ItemTentativeFinal (to be finalized on Mar 21)"Tentative" price per share to be offered₩49,316???"Tentative" number of new rights to be offered7,856,547 common shares???"Tentative" amount of new rights to be offered₩387,453,471,852???Source: KINDThen, when will SK Discovery's swap price be finalized? It will be finalized on Mar 21 based on the following formula. Discovery will then announce this final price via a regulatory filing on Mar 22.= VWAP from Mar 19 to 21 with no discountSo, once we finalize Discovery's swap price on Mar 21,then we will subsequently get a total number/amount of Discovery's new rights to be offered based on the following formula.A = Chemicals 3,500,000 shares x ₩110,701B = Discovery's share price to be swappedC = Number of Discovery shares to be offered = A / BD = Amount of Discovery shares to be offered = C × DIn the end, Discovery's shareholding structure will look like this.Discovery's shareholding structure post rights offering/tender offerNew rights offering7,856,547Current number of issued shares12,142,738(Common: 10,784,283 / pref: 1,358,455)Number of issued shares post rights offering/tender offer19,999,285Source: KINDBelow is the schedule for the upcoming events that we do not want to miss.Upcoming event scheduleBoard resolutionFeb 22SubscriptionMar 26 - Apr 16Settlement (payment)Apr 18AllocationApr 27ListingApr 30BankerNH Investment &amp; Securities Co Ltd (005940 KS)Source: KIND

SK Discovery & SK Chemicals Tender Offer Summary

South Korea

SK Chemicals Co.,Ltd manufactures environmentally friendly materials. The Company produces and sells composites, high-performance materials, energy saving materials, and other products. SK Chemicals also offers total healthcare solutions services. SK Chemicals serves customers worldwide.

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SK Chemicals (285130 KS)

SK Discovery & SK Chemicals Tender Offer - Arb Yield Calculations & Situation Update

We are getting closer to the 3 day swap price determination period for SK Discovery Co Ltd (006120 KS), which is Mar 19-21.Remember? The swap price...

Sanghyun Park

SK Discovery & SK Chemicals Tender Offer Summary

Everyone knew SK Discovery would do a tender offer to SK Chemicals shareholders to swap their SK Chemicals shares with the holdco shares. This is a...

Sanghyun Park

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