Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

HK Type 4 license through Ballingal Investment Advisors Ltd. 

I'm a highly experienced sell-side analyst with in excess of 22 years of covering Asia Pacific equities, the past 19 years immersed in event strategies encompassing M&A risk arbitrage, directional long/short, stub trades and restructuring.  

My background also includes accountancy (liquidation/bankruptcy/receivership) earlier in my career and as a chief financial officer of a global commodity company based in the US and Mexico.

Pan-Asia Catalysts/Events

LG Corp – The Whitebox Case in Light of Activist Victory at Toshiba

LG Corp Split: Schedule, Financials, Base Price MC, Subs Stake Value, & KOSPI 200 Inclusion

LG Corp Split: Major Shareholder Cross Trading Dynamics

2021 High Conviction: LG Corp's Decade-Low Stub

LG Group Announces the Formation of LG NewCo & Split of 4 Companies from LG Corp

Quiddity Advisors

Event-Driven

<div>
<p>On 26 November, <a href="https://www.smartkarma.com/entities/lg-corp" target="_blank" data-smartkarma-citation="entities:6653:1" rel="noopener">LG Corp (003550 KS)</a> officially announced it would be splitting itself into two - the core electronics, chemicals, and telecoms business will stay in LG Corp, with the remaining non-core holdings transferred to NewCo, a new holding company, and subsequently spin-off to LG Corp shareholders.</p>
<p><a href="https://www.smartkarma.com/profiles/douglas-kim" target="_blank" data-smartkarma-citation="accounts:342" rel="noopener">Douglas Kim</a> discussed this transaction beginning with <em><a href="https://skr.ma/BZgGp" target="_blank" rel="noopener">LG Group Announces the Formation of LG NewCo &amp; Split of 4 Companies from LG Corp</a></em>, and I added my thoughts in <em><a href="https://skr.ma/Tdpxs" target="_blank" rel="noopener">2021 High Conviction: LG Corp's Decade-Low Stub</a></em>.</p>
<p>The benefits of the demerger are projected to be two-fold. The NewCo is expected to improve the competitiveness and efficiency of the business (potentially re-rating the company); but also as an interim step to facilitate share swaps with the family with the two holding companies. This has been speculated since Koo Kwang-mo was inaugurated as chairman in 2018. NewCo's board of directors will be headed by Koo Bon-joon, the uncle of Kwang-Mo. </p>
<p>The remaining Holdco will focus on steady earnings from its core operations (electronics, chemicals, and telecom), and via new opportunities. LG provided further rationale for the spin-off in its 4Q20 results - that is attached at the bottom of this insight.</p>
<p>It was noted, however, that LG Corp would maintain 91.5% of the group's assets - ₩9,779.8bn - as at 3Q20. This raises the question: just how much value can be unlocked by via spinning off ~8%?</p>
<p>The NAV and implied stub <em>widened</em> after the demerger announcement, and following a tepid reversal, narrowed around the time <a href="https://www.smartkarma.com/entities/lg-electronics-inc" target="_blank" data-smartkarma-citation="entities:8814:1" rel="noopener">LG Electronics (066570 KS)</a> announced a US$1bn JV with Magna on the 22 December to make electric car gears.</p>
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<div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/192/369/original/image_5243749941614909471522.png?1614909471" class="editor-image img-responsive" data-smartkarma-image-id="192369"></figure>
<p style="text-align: left;">Source: my calcs, CapIQ</p>
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<p>On the 15 December, US-headquartered Whitebox said:</p>
<blockquote>
<p>The spin-off does nothing to address LG’s most pressing issue, which is the unprecedented discount at which the company trades relative to its assets and, accordingly, inferior return to shareholders.</p>
<p>Despite clearly favorable alternatives, the board (of LG) has unanimously approved a plan that, in our view, sacrifices minority shareholder return in order to resolve a family succession issue.</p>
</blockquote>
</div>
<div>
<p>Whitebox has now issued a 30-page PowerPoint detailing its objection to the demerger. It's worth a read.</p>
</div>
<p>More below the fold.</p>
<div>
<p></p>
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On 26 November, LG Corp (003550 KS) officially announced it would be splitting itself into two - the core electronics, chemicals, and telecoms business will stay in LG Corp, with the remaining non-core holdings transferred to NewCo, a new holding company, and subsequently spin-off to LG Corp shareholders.
Douglas Kim discussed this transaction beginning with LG Group Announces the Formation of LG NewCo &amp; Split of 4 Companies from LG Corp, and I added my thoughts in 2021 High Conviction: LG Corp's Decade-Low Stub.
The benefits of the demerger are projected to be two-fold. The NewCo is expected to improve the competitiveness and efficiency of the business (potentially re-rating the company); but also as an interim step to facilitate share swaps with the family with the two holding companies. This has been speculated since Koo Kwang-mo was inaugurated as chairman in 2018. NewCo's board of directors will be headed by Koo Bon-joon, the uncle of Kwang-Mo. 
The remaining Holdco will focus on steady earnings from its core operations (electronics, chemicals, and telecom), and via new opportunities. LG provided further rationale for the spin-off in its 4Q20 results - that is attached at the bottom of this insight.
It was noted, however, that LG Corp would maintain 91.5% of the group's assets - ₩9,779.8bn - as at 3Q20. This raises the question: just how much value can be unlocked by via spinning off ~8%?
The NAV and implied stub widened after the demerger announcement, and following a tepid reversal, narrowed around the time LG Electronics (066570 KS) announced a US$1bn JV with Magna on the 22 December to make electric car gears.



Source: my calcs, CapIQ


On the 15 December, US-headquartered Whitebox said:

The spin-off does nothing to address LG’s most pressing issue, which is the unprecedented discount at which the company trades relative to its assets and, accordingly, inferior return to shareholders.
Despite clearly favorable alternatives, the board (of LG) has unanimously approved a plan that, in our view, sacrifices minority shareholder return in order to resolve a family succession issue.



Whitebox has now issued a 30-page PowerPoint detailing its objection to the demerger. It's worth a read.

More below the fold.




LG Corp (003550 KS): Whitebox States Its Case