Korea Tobacco May Raise Cigarette Prices to Boost Its $1 BillionGDR Sale (fwd)

[Robert Weissman <rob@essential.org>]

Korea Tobacco May Raise Cigarette Prices to Boost Its $1 Billion GDR Sale
by Judy Lee
Source: Bloomberg News, Friday, 10/22/99

Seoul, Oct. 22 (Bloomberg) -- Korea Tobacco & Ginseng Corp., the
state-controlled tobacco monopoly, may raise cigarette prices and pay
special dividends to sweeten next month's $1 billion share sale to foreign
investors, a company official said.

The company may also buy back stock in a bid to boost shareholder returns,
said the official, who asked not to be identified.

The incentives may be needed as three recent Korean share sales foundered
because of fallout from the collapse of Daewoo Group, which owes creditors
$57 billion. The government plans to sell 15 percent of Korea Tobacco, or
about 28 million shares, in the form of depositary receipts.

``We are drawing up measures that will certainly help raise the value of
the company,'' said Choi Sang Chul, head of Korea Tobacco's equity sales
team.

This month, Korea Exchange Bank abandoned a $1 billion overseas share sale
after investors balked at the price. Cho Hung Bank and KorAm Bank said
they may postpone stock sales totaling $1.4 billion because of a slumping
stock market and concern Daewoo's debt problems will disrupt Korea's
banking system.

Finance & Economy Minister Kang Bong Kyun decided to proceed with the
Korea Tobacco sale at a meeting today, said Yeon Sun Kang, a ministry
spokeswoman. A fourth delay, especially by a state-owned company, could
undermine confidence in Korea's ability to recover from recession.

Profitable Business Korea Tobacco raised cigarette prices an average of 10
percent in January. At about 1,100 won for a pack of 20, Korean cigarettes
are among the cheapest in the world. In Hong Kong, a pack costs more than
$4.

For Korea Tobacco to raise $1 billion by selling 28 million shares, the
price would have to be set at $35.71 a share. The stock last traded at
33,650 won, or $27.91 a share The 100-year-old company is one of Korea's
most profitable state businesses and has little debt. It earned 307.5
billion won last year on sales of 4.8 trillion won.

Korea Tobacco is the sixth-biggest stock on the Korea Stock Exchange by
market value.

Credit Suisse First Boston, Warburg Dillon Read, Dongwon Securities Co.
and Hyundai Securities Co. are arranging the overseas share sale.