In today’s briefing:
- SK Discovery Launches Opportunistic Partial Tender on SK Chemicals To Buy SK Bio CHEAP
- SK Chemicals Cash Offer: Complete Details
- New Regulations on Split-Off Listing in Korea: Complete Details & Trading Implications
- A Policy Shift from Simply Maintaining Corporate Performance to How to Raise Added Value Is Needed
SK Discovery Launches Opportunistic Partial Tender on SK Chemicals To Buy SK Bio CHEAP
- 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 Chemicals Cash Offer: Complete Details
- 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.
New Regulations on Split-Off Listing in Korea: Complete Details & Trading Implications
- The Korea FSC finalized the additional investor protection measures: 1. stricter disclosure rules, 2. tighter listing requirements, and 3. mandatory appraisal rights.
- The retroactive application period is five years. Companies that have been split off five years ago from the effective date are also subject to these new rules.
- We can play LONG/SHORT aimed at staggered spreads, considering that the pricing period is 2M VWAP and that a downward price revision intensifies towards the announcement with mandatory appraisal rights.
A Policy Shift from Simply Maintaining Corporate Performance to How to Raise Added Value Is Needed
- OP margins for listed companies haven’t increased notably, with maximum of 5% since FY 2008. Meanwhile, real income has continued declining, and there has been trend to reduce labor costs.
- The negative aspect is illustrated by the low level of employee engagement in a company that has managed to maintain operating margin at current level by keeping labor costs low.
- Inadequate investment by both companies and employees has hindered the expansion of value-added. For expanding added value, shift to investment in human resources is needed along with wage increases.
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