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

Sanghyun Park

I investigate special situations, pairs, and index rebalancing trades in Korea.

Korea / Special Sits, Pairs, Index Rebalancing

GS Retail Merger Swap Arb Trade Begins This Monday

GS Retail Merger Swap Arb Yield Currently at 4.27%: Trade It Now Rather than Later

GS Retail Merger Arbitrage: Yield Back at +6% & Local Arb Traders in Action

Event-Driven

<p>GS announced a merger of Retail (007070) and Home Shopping (028150) at a swap ratio of 4.2236834.</p><p>GS Holdings (078930) owns both subsidiaries.</p><p>They set the purchase right ceiling at <strong>₩350B</strong><strong>combined</strong>, about 8% of the combined MC.</p><table class="table table-striped">
<colgroup>
<col width="300">
<col width="300">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Overview (₩B)"}'>Overview (₩B)</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Type"}'>Type</td>
<td data-sheets-value='{"1":2,"2":"Stock swap"}'>Stock swap</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Acquirer"}'>Acquirer</td>
<td data-sheets-value='{"1":2,"2":"GS Retail Co Ltd"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>GS Retail Co Ltd</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Ticker"}'>- Ticker</td>
<td data-sheets-value='{"1":2,"2":"007070"}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula='="007070"'>007070</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - SO"}'>- SO</td>
<td data-sheets-value='{"1":3,"3":77000000}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula='=googlefinance(R[-1]C[0], "shares")'>77,000,000</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Target company"}'>Target company</td>
<td data-sheets-value='{"1":2,"2":"GS Home Shopping Inc."}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>GS Home Shopping, Inc.</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Ticker"}'>- Ticker</td>
<td data-sheets-value='{"1":2,"2":"028150"}' data-sheets-numberformat='{"1":2,"2":"#,##0.0000000","3":1}' data-sheets-formula='="028150"'>028150</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - SO"}'>- SO</td>
<td data-sheets-value='{"1":3,"3":6562500}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula='=googlefinance(R[-1]C[0], "shares")'>6,562,500</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Offering share type"}'>Offering share type</td>
<td data-sheets-value='{"1":2,"2":"Acquirer ordinary share"}' data-sheets-numberformat='{"1":2,"2":"#,##0.00000","3":1}'>Acquirer ordinary share</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Offering price"}'>Offering price</td>
<td data-sheets-value='{"1":3,"3":33800}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}'>₩33,800</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Offering volume"}'>Offering volume</td>
<td data-sheets-value='{"1":3,"3":27717922.312499996}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=sum(R[1]C[0]:R[2]C[0])">27,717,922</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Treasury"}'>- Treasury</td>
<td data-sheets-value='{"1":3,"3":2530831.0932799997}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=599200*R[7]C[0]">2,530,831</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Ordinary"}'>- Ordinary</td>
<td data-sheets-value='{"1":3,"3":25187091.219219998}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[4]C[0]*R[6]C[0]-R[-1]C[0]">25,187,091</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Offering value"}'>Offering value</td>
<td data-sheets-value='{"1":3,"3":936.8657741624999}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}' data-sheets-formula="=R[-4]C[0]*R[-3]C[0]/1000000000">936.9</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Target share type"}'>Target share type</td>
<td data-sheets-value='{"1":2,"2":"Target company ordinary share"}' data-sheets-numberformat='{"1":2,"2":"#,##0.00000","3":1}'>Target company ordinary share</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Target price"}'>Target price</td>
<td data-sheets-value='{"1":3,"3":142762}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}'>₩142,762</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Target volume"}'>Target volume</td>
<td data-sheets-value='{"1":3,"3":6562500}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-9]C[0]">6,562,500</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - % of SO"}'>- % of SO</td>
<td data-sheets-value='{"1":3,"3":1}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-1]C[0]/R[-10]C[0]">100.00%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Swap ratio"}'><strong>Swap ratio</strong></td>
<td data-sheets-value='{"1":3,"3":4.2236834}' data-sheets-numberformat='{"1":2,"2":"#,##0.0000000","3":1}'><strong>4.2236834</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Stock purchase ceiling condition"}'><strong>Stock purchase ceiling condition</strong></td>
<td data-sheets-value='{"1":2,"2":"If exceeds for both combined"}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}'><strong>If exceeds for both combined</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Amount"}'><strong>- Amount</strong></td>
<td data-sheets-value='{"1":3,"3":350}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}'><strong>350.0</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Exercise price - GS Retail Co Ltd"}' data-sheets-formula='="Exercise price - "&amp;R[-19]C[1]'>Exercise price - GS Retail Co Ltd</td>
<td data-sheets-value='{"1":3,"3":34125}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}'>₩34,125</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Exercise price - GS Home Shopping Inc."}' data-sheets-formula='="Exercise price - "&amp;R[-17]C[1]'>Exercise price - GS Home Shopping Inc.</td>
<td data-sheets-value='{"1":3,"3":138855}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}'>₩138,855</td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><p>For purchase rights, today is the last day to become eligible.</p><p>The ex-rights falls on April 16 next year, followed by the dissenting opinion notice on May 13~27. The shareholder meeting is on May 28.</p><p>The new shares will be listed on July 16.</p><table class="table table-striped">
<colgroup>
<col width="300">
<col width="300">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Timetable"}' data-sheets-note="Sang Hyun Park: We have to buy shares until BOD+1 to be eligible to receive stock purchase rights. We then have to notify our dissenting opinion until the end of dissenting opinion notice period.">Timetable</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"BOD meeting"}'>BOD meeting</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44145}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2020. 11. 10</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Last day to own stock purchase rights"}'><strong>Last day to own stock purchase rights</strong></td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44146}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>2020. 11. 11</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Ex-rights date"}'><strong>Ex-rights date</strong></td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44302}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>2021. 4. 16</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Record date of shareholder register"}'>Record date - shareholder register</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44305}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 4. 19</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Dissenting opinion notice begins"}'>Dissenting opinion notice begins</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44329}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 5. 13</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Dissenting opinion notice ends"}'>Dissenting opinion notice ends</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44343}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 5. 27</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"EGM"}'><strong>EGM</strong></td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44344}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>2021. 5. 28</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Stock purchase right exercise begins"}'>Stock purchase right exercise begins</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44344}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 5. 28</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Stock purchase right exercise ends"}'>Stock purchase right exercise ends</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44364}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 6. 17</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Trade suspension begins - GS Home Shopping"}'>Trade suspension begins - GS Home Shopping</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44376}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 6. 29</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Trade suspension ends - GS Home Shopping"}'>Trade suspension ends - GS Home Shopping</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44392}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 7. 15</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Listing"}'>Listing</td>
<td style="text-align: left;" data-sheets-value='{"1":3,"3":44393}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 7. 16</td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><p>GS Holdings retains 36.1% in Home Shopping and 65.8% in Retail.</p><p>I don't see a reason for the NPS to vote against the merger. Combining the NPS and the friendly shareholders (Hanjin), the controlling stake reaches 72% for Retail and 50% for Home Shopping.</p><p>A fierce proxy fight? It is unlikely.</p><table class="table table-striped">
<colgroup>
<col width="300">
<col width="300">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Shareholding - target company"}'>Shareholding - target company (GS Home Shopping)</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"GS Holdings Corp"}' data-sheets-formula='=googlefinance("078930", "name")'><strong>GS Holdings Corp</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.36097523809523807}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=2368900/R8C2"><strong>36.10%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Korea NPS"}'>Korea NPS</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.0500728380952381}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=328603/R8C2">5.01%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Bearing Asset Management"}'>Bearing Asset Management</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.05017005714285714}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=(301839+25544+1858)/R8C2">5.02%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Korean Air Lines Co Ltd"}' data-sheets-formula='=googlefinance("003490", "name")'>Korean Air Lines Co Ltd</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.045008761904761906}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=295370/R8C2">4.50%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Hanjin Transportation Co., Ltd."}' data-sheets-formula='=googlefinance("002320", "name")'>Hanjin Transportation Co., Ltd.</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.034991238095238096}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=229630/R8C2">3.50%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Treasury shares"}'>Treasury shares</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.007781818181818181}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=599200/R5C2">0.78%</td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: FnGuide"}'>Source: FnGuide</td></tr>
</tbody>
</table><table class="table table-striped">
<colgroup>
<col width="300">
<col width="300">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Shareholding - acquirer"}'>Shareholding - acquirer (GS Retail)</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"GS Holdings Corp"}' data-sheets-formula='=googlefinance("078930", "name")'><strong>GS Holdings Corp</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.6575122077922078}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=50628440/R5C2"><strong>65.75%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Special affiliated persons"}'>Special affiliated persons</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.00025974025974025974}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=20000/R5C2">0.03%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Major shareholder"}'>- Major shareholder</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.657771948051948}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=sum(R[-2]C[0]:R[-1]C[0])">65.78%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Korea NPS"}'>Korea NPS</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.060418987012987015}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=4652262/R5C2">6.04%</td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: FnGuide"}'>Source: FnGuide</td></tr>
</tbody>
</table>

GS announced a merger of Retail (007070) and Home Shopping (028150) at a swap ratio of 4.2236834.GS Holdings (078930) owns both subsidiaries.They set the purchase right ceiling at ₩350Bcombined, about 8% of the combined MC.





Overview (₩B)

Type
Stock swap


Acquirer
GS Retail Co Ltd


- Ticker
007070


- SO
77,000,000


Target company
GS Home Shopping, Inc.


- Ticker
028150


- SO
6,562,500


Offering share type
Acquirer ordinary share


Offering price
₩33,800


Offering volume
27,717,922


- Treasury
2,530,831


- Ordinary
25,187,091


Offering value
936.9


Target share type
Target company ordinary share


Target price
₩142,762


Target volume
6,562,500


- % of SO
100.00%


Swap ratio
4.2236834


Stock purchase ceiling condition
If exceeds for both combined


- Amount
350.0


Exercise price - GS Retail Co Ltd
₩34,125


Exercise price - GS Home Shopping Inc.
₩138,855

Source: DART

For purchase rights, today is the last day to become eligible.The ex-rights falls on April 16 next year, followed by the dissenting opinion notice on May 13~27. The shareholder meeting is on May 28.The new shares will be listed on July 16.





Timetable

BOD meeting
2020. 11. 10


Last day to own stock purchase rights
2020. 11. 11


Ex-rights date
2021. 4. 16


Record date - shareholder register
2021. 4. 19


Dissenting opinion notice begins
2021. 5. 13


Dissenting opinion notice ends
2021. 5. 27


EGM
2021. 5. 28


Stock purchase right exercise begins
2021. 5. 28


Stock purchase right exercise ends
2021. 6. 17


Trade suspension begins - GS Home Shopping
2021. 6. 29


Trade suspension ends - GS Home Shopping
2021. 7. 15


Listing
2021. 7. 16

Source: DART

GS Holdings retains 36.1% in Home Shopping and 65.8% in Retail.I don't see a reason for the NPS to vote against the merger. Combining the NPS and the friendly shareholders (Hanjin), the controlling stake reaches 72% for Retail and 50% for Home Shopping.A fierce proxy fight? It is unlikely.





Shareholding - target company (GS Home Shopping)

GS Holdings Corp
36.10%


Korea NPS
5.01%


Bearing Asset Management
5.02%


Korean Air Lines Co Ltd
4.50%


Hanjin Transportation Co., Ltd.
3.50%


Treasury shares
0.78%

Source: FnGuide







Shareholding - acquirer (GS Retail)

GS Holdings Corp
65.75%


Special affiliated persons
0.03%


- Major shareholder
65.78%


Korea NPS
6.04%

Source: FnGuide



GS Retail/Home Shopping Merger Swap: Currently at 3.4% Div-Adj. Spread