HONG KONG Riding a Seoul stocks revival, some of South Korea's biggest family firms are set to clean house this year with multi-billion dollar initial public offerings that will fire the country to a record year for new listings.
Family-run conglomerates, or "chaebols", like Samsung, Doosan and Lotte are listing assets to streamline structures, smooth paths toward management succession or ease debt burdens. Added to other deals in the pipeline, IPOs planned by these three will take proceeds this year to at least $10 billion, bankers say, eclipsing 2010's high of $8.5 billion.
Coming on the back of a near-10 percent rally in Seoul's benchmark share index since mid-February, the sales will test international investor appetite for minority holdings in firms dominated by some of the best-known names in South Korean business. But the scale of the IPOs and relative stability of the domestic market compared to jitters over prospects in China this year make them a magnet for Korean investors at least.
"We have to pay attention to these listings because they are large-cap deals," said Park Sung-jin, a fund manager at Woori Asset Management in Seoul. "Benchmark funds, such as those for (Korea's) National Pension Service, cannot pass them by," he said, referring to the world's third-largest pension fund with about $81 billion invested in South Korean stocks at end-2015.
IPOs expected this year include Hotel Lotte Co, potentially the country's biggest ever at up to $5 billion, drugmaker Samsung Biologics and construction equipment maker Doosan Bobcat Inc, the latter two seen worth $2 billion and $1 billion respectively.
Hotel Lotte's listing is expected in the second half of June while Doosan Bobcat's is due in the fourth quarter of 2016, Thomson Reuters publication IFR reported. Samsung Biologics hasn't disclosed a timeline for its deal.
Amid the resurgence in Seoul's IPO interest, newer firms are also set to pile in, including top mobile game maker Netmarble Games with a projected $1.7 billion listing.
The expected surge in activity would still leave Seoul firmly in the shadow of Hong Kong, where IPOs at the local exchange tally totaled $23.7 billion last year, making it the world's biggest IPO venue.
But compared with the $3.5 billion raised in South Korean IPOs last year, 2016's potential growth points to determination among the "chaebols" to take action. As well as IPOs, secondary issuance is being lined up in already listed businesses like insurer Samsung Life Co Ltd and steelmaker POSCO, bankers say.
IN THE STARS
"Stars are aligning so that a lot of those corporates need to do something, hence the resulting rise in activities," said a Seoul-based equity capital markets banker, who couldn't be named because details of the deals have not been made public.
Still, investors may have just cause for a pause to consider exactly what they're getting into.
The Lotte Group plan to list one of the jewels in a consumer goods to leisure business empire comes after a bitter succession feud between sons of company founder Shin Kyuk-ho flared into public view last year. Bankers say the sale is nonetheless being primed to beat South Korea's existing IPO record, set in 2010 when Samsung Life Insurance raised $4.4 billion.
Meanwhile Samsung Group is immersed in its own succession preparations. Since 2014, it has been reshuffling its sprawling array of listed assets to cement the position of Jay Y. Lee, vice chairman of tech giant Samsung Electronics and heir-apparent to ailing patriarch Lee Kun-hee.
Those moves triggered an acrimonious spat with minority investor Elliott Management last year that saw the hedge fund air complaints alleging Samsung disregard for shareholders in Seoul courtrooms. Elliott lost its case and ultimately sold its shares - but not before casting the spotlight on Samsung's approach to corporate governance.
Whatever the issues at Lotte and Samsung last year, bankers expect strong interest in deals in 2016.
Before the major IPOs kick off, South Korea has already racked up $2.7 billion worth of deals, and bankers expect secondary offerings this year from firms like Samsung Life, steelmaker POSCO and Doosan Co Ltd. All three firms declined to comment.
"South Korea has been very resilient despite all the stress and worries in the rest of Asia," said a senior Hong Kong-based equity capital market banker working on several Seoul deals, who could not be named discussing the matter.
(Additional reporting by Joyce Lee in SEOUL; Editing by Denny Thomas and Kenneth Maxwell)
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