Hive “SM tender offer price will not be raised”… Pay Attention to Kakao
When the provisional injunction was dismissed, the possibility of a tender offer once morest Kakao was raised
Difficulties from the beginning of the tender offer as stock prices rise
(Seoul = Yonhap News) Reporter Chae Sae-rom and Hong Yoo-dam = SM (SM) stock price soared, Hive[352820]As the tender offer for Hive exceeded 120,000 won, Hive’s stock tender offer ran into difficulties.
The industry predicts that Kakao will launch a counterattack such as a ‘counter tender offer’ as soon as the results of the preliminary injunction come out. Some are citing the possibility that Hive will raise the purchase price for the success of the tender offer even before that, but Hive is in the position that there is no plan to adjust the purchase price.
Hive’s SM tender offer is also comparable to the recent performance of a private equity fund manager’s Osstem Implant tender offer, but it is analyzed that the purpose of the tender offer is different.
◇ Pay attention to Kakao’s countermeasures… Hive emphasizes the position that “there is no increase in the tender offer”
According to the financial investment industry on the 19th, Kakao is currently in contact with a large securities company to review SM M&A plans, including a tender offer.
Kakao and the securities company are in the position that nothing has been decided yet, but the industry expects that Kakao will review the tender offer as soon as the results of the provisional disposition come out and put it into practice.
An analyst at a securities company who requested anonymity said, “Kakao is in the process of a provisional disposition, so we cannot express our official intention, but the market believes that Kakao will launch a tender offer.” There is also an analysis that shows a movement to raise it to more than 120,000 won,” he said.
On the 16th, speculation was raised that the net purchase of 650,000 SM stocks (2.73%) by one other corporation during the intraday in a single account was Kakao’s attempt to cancel Hive’s tender offer.
As Kakao’s participation in the war deepened, SM’s share price, which had been moving below 120,000 won, rose 4.97% on the 15th to exceed 120,000 won, and rose 7.59% on the 16th, soaring to 133,600 won. On the 17th, it fell 1.36%, but closed at 130,100 won and maintained the 130,000 won range.
If Kakao proposes to proceed with a tender offer at 120,000 won or more, a plan for Hive to raise the existing tender offer price is also being discussed.
Under the Capital Markets Act, the tender offeror cannot withdraw the tender offer following the tender offer announcement date. However, if the price is raised rather than lowered, the terms of the purchase can be corrected until the expiration date. If the purchase conditions are amended, the tender offer expiration date will be extended to 10 days following the submission of the correction report.
In addition to Lee Soo-man’s 14.8% stake (3,523,420 shares), Hive announced that it would make a tender offer for up to 25% of minority shareholders’ shares by the 28th of this month.
However, Hive continues to maintain its position that it has no plans to raise the tender offer price.
An official from Hive emphasized, “(Although the current share price is higher than the tender offer price), we plan to keep the current proposed price unchanged until the tender offer ends.”
An official in the securities industry said, “The fact that Kakao is raising the tender offer price and the possibility of competing once morest it means that SM’s corporate value is higher than Hive’s ‘120,000 won per share’.” “I failed to convince you,” he said.
◇ Intensifying dispute over management rights… Mountains to climb
The market’s attention surrounding SM’s management rights is first focused on whether or not to issue a provisional injunction.
On the 22nd, the Seoul Eastern District Court will hold an interrogation date for a provisional injunction once morest the issuance of new shares and convertible bonds of SM, which was raised by former SM general producer Lee Soo-man.
Former general manager Lee’s position is that the resolution by SM management to issue new stocks worth regarding 111.9 billion won and convertible bonds worth 105.2 billion won to Kakao through a third party was not for business purposes and was once morest the law.
The outcome of the provisional injunction is highly likely to come out in early March, between Hive’s tender offer deadline (February 28) and Kakao’s new share issuance date (March 6).
If the injunction is cited, the possibility of Kakao’s acquisition becomes slim as the issuance of new shares is canceled.
The industry believes that both Hive and Kakao need to secure a minimum stake of 30% in order to incorporate SM into a consolidated subsidiary.
Park Da-gyeom, a researcher at Hi Investment & Securities, said, “If Kakao buys 30% without a 9.05% stake, it will have to be purchased at a higher price than Hive, but it will cost more than 1 trillion won.”
If the provisional injunction is dismissed, Kakao can purchase additional shares under the premise that Hive’s tender offer has failed. In January, Kakao Enter raised 1.2 trillion won from the Singapore Investment Authority (GIC) and the Saudi National Wealth Fund (PIF).
Even if one of the two companies acquires SM, it must pass the fair competition review.
According to the FTC, if a company with assets or sales of 300 billion won or more acquires 15% or more of the shares of a listed company with assets or sales of 30 billion won or more, it must report the business combination to the FTC. When a business combination report is received, the Fair Trade Commission examines whether the combination of the two companies does not limit competition in the market and whether there is no risk of abuse by acquiring market dominance.
Kyobo Securities[030610]According to Circle Chart, the share of last year’s album sales by major entertainment companies is estimated to be 26.8% for Hive, 19.1% for SM, and 7.6% for Kakao Enter.
If Hive acquires SM, it is expected that a ‘super-large number one company’ will emerge, raising concerns over monopoly.
◇ Unlike Osstem Implant, Hive’s tender offer for SM was difficult from the beginning
Hive’s tender offer for SM was predicted to be difficult from the beginning, compared to the tender offer for Osstem Implant, which is currently underway by private equity funds MBK Partners and UCK (Unison Capital Korea).
SM[041510]and Osstem Implant were both targeted by activist funds for shareholder action, but they took opposite steps in the tender offer process.
When the MBK-UCK coalition’s tender offer plan was announced last month, activist fund KCGI, which had been buying shares of Osstem Implant for the purpose of ‘influencing management rights’, expressed its welcome, saying that it expects improvements in governance.
On the other hand, when Hive launched a tender offer, Align Partners Asset Management immediately staged a public opinion campaign once morest it, saying, “The tender offer price of 120,000 won is a low price considering the effect of implementing the ‘SM 3.0’ multi-producing strategy.”
Unlike Osstem Implant, which is a dental product and technology company, SM is an entertainment company with large idols, so the public’s attention was focused on Align’s claim.
In the case of Osstem Implant, the strand is set to delist following the successful tender offer to improve governance, but SM is pointed out that it has limitations in that it is a tender offer to win a victory in a management rights dispute.
If the listing is scheduled, there are not many incentives for the share price to rise following the tender offer, so it is reasonable for investors to get out of hand.
Among domestic M&A deals, it is difficult to find cases in which a tender offer was used as well as a counter tender offer.
In case of mergers and acquisitions, if you use the following-hours block deal method, you can certainly secure a large stake at once. There are weaknesses that arise.
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