Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Nearly 30 years of experience in the Korean/Asian equity research. Major sectors coverage include the following:
- Technology 
- Consumer 
- Special Situations/Deep Value Plays
- Tender Offers/M&As
- Holdcos/Stubs
- Asian Unicorns/Private Companies

Korea/Asia, Events, IPOs

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Equity Bottom-Up

<p>There have been numerous accounts that ADT Caps may be getting ready to complete its IPO in 2021, which could result in one of the largest IPOs in Korea next year. ADT Caps is the second-largest alarm monitoring service provider in Korea with a market share of about 30% (after S1 Corp which has a market cap of about 50%). A private company called Life &amp; Security Holdings (previously called Siren Holdings Korea) owns a 100% stake in ADT Caps.</p>
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<p><strong>The Key Catalyst is the Merger between ADT Caps and Life &amp; Security Holdings - When &amp; How Will This Happen? </strong>If when SK Telecom announces that there will be a merger between ADT Caps and Life &amp; Security Holdings, this is a key catalyst since it will precede the IPO of the merged ADT Caps and Life &amp; Security Holdings. However, despite the outstanding financials of ADT Caps, Life &amp; Security Holdings is saddled with excessive debt and lower returns on capital and lower profit margins than ADT Caps alone.</p>
<p>In conclusion, a merger between the two companies is not an easy process. Plus, it remains uncertain how much premium the investors are likely to place on the merged entity between ADT Caps and Life &amp; Security Holdings, given the latter company's high leverage and lower returns on capital. In terms of the timing of the potential merger, it appears 2021 is more likely as the private equity investors seek to exit through an IPO. The local media have mentioned that ADT Caps could be valued at about <a href="https://www.fnnews.com/news/202009021719267356" target="_blank" rel="noopener">2 trillion won</a> once it completes its IPO. This valuation would assumed a merged entity between ADT Caps and Life &amp; Security Holdings. </p>
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There have been numerous accounts that ADT Caps may be getting ready to complete its IPO in 2021, which could result in one of the largest IPOs in Korea next year. ADT Caps is the second-largest alarm monitoring service provider in Korea with a market share of about 30% (after S1 Corp which has a market cap of about 50%). A private company called Life &amp; Security Holdings (previously called Siren Holdings Korea) owns a 100% stake in ADT Caps.

The Key Catalyst is the Merger between ADT Caps and Life &amp; Security Holdings - When &amp; How Will This Happen? If when SK Telecom announces that there will be a merger between ADT Caps and Life &amp; Security Holdings, this is a key catalyst since it will precede the IPO of the merged ADT Caps and Life &amp; Security Holdings. However, despite the outstanding financials of ADT Caps, Life &amp; Security Holdings is saddled with excessive debt and lower returns on capital and lower profit margins than ADT Caps alone.
In conclusion, a merger between the two companies is not an easy process. Plus, it remains uncertain how much premium the investors are likely to place on the merged entity between ADT Caps and Life &amp; Security Holdings, given the latter company's high leverage and lower returns on capital. In terms of the timing of the potential merger, it appears 2021 is more likely as the private equity investors seek to exit through an IPO. The local media have mentioned that ADT Caps could be valued at about 2 trillion won once it completes its IPO. This valuation would assumed a merged entity between ADT Caps and Life &amp; Security Holdings. 


SK Telecom

Initial Thoughts on the ADT Caps IPO