[Intl-tobacco] Korea Tobacco to sell govt stake at 4.5 pct premium

[Robert Weissman]

Korea Tobacco to sell govt stake at 4.5 pct premium

by Nam In-soo and Cheon Jong-woo
Source: Reuters, 2002-06-20, via tobacco.org
URL: http://biz.yahoo.com/rf/020620/tobacco_korea_pricing_1.html

SEOUL, June 20 (Reuters) - Korea Tobacco and Ginseng Corp said on
Thursday it would sell a stake held by the government at a 4.5
percent premium under a plan to fully privatise the tobacco
monopoly this year.

The government, which holds a 33.16 percent stake in the country's
sole cigarette manufacturer via state-controlled banks, plans to
dispose of the entire stake domestically and overseas by July.

The tobacco monopoly said the stock to be offered to the public was
set at 16,200 won ($13.33), a 4.5 percent premium based on
Thursday's close.

Korea Tobacco shares finished up 2.3 percent at 15,500 won on
Thursday, outperforming the broader benchmark index, up 0.06
percent.

"The price was higher than expected," said Hwang Chan, an analyst
at SK Securities. "The stocks could face selling pressure for the
time being, but over the long term, it's worth holding them, given
the company's fundamentals."

A book-building conducted earlier to gauge potential share demand
had shown institutional investors bid for 9.34 times as many shares
as offered to them.

State-owned banks are selling a 19.37 percent stake in Korea
Tobacco to local investors, which breaks down into 3.87 percent to
company employees, 7.75 percent in straight equities to
institutional and retail investor and another 7.75 percent in the
form of exchangeable bonds (EBs).

Individual and institutional investors can subscribe for the stock
purchase on Friday and Saturday.

The EB conversion price was set at 17,820 won. Korea Tobacco had
said the yield on the EBs was set at 5.7 percent and the coupon at
3.0 percent.

The government will sell a further 13.79 percent stake in Korea
Tobacco in the form of global depositary receipts next month.

SCRAPPING FOREIGN OWNERSHIP CAP

To help smooth the sale, the finance ministry has said it would
scrap the 49 percent foreign ownership ceiling and the seven
percent holding limit on any single individual after the
company was fully privatised.

Facing stiff competition from imported brands, the market share of
Korea Tobacco and Ginseng Corp hovers at around 80 percent.

British American Tobacco (BAT), the world's second largest tobacco
group, said last August it planned to build a $1.1 billion factory
in South Korea over the next three years.

BAT, maker of Dunhill, Lucky Strike, Kent and Pall Mall, will
become the first foreign cigarette plant in the country.

Korea Tobacco's first-quarter net profit jumped 74 percent
year-on-year to 112 billion won, helped by cigarette price hikes
and despite a national anti-smoking drive.

Sales in the first three months of this year rose 16.6 percent
year-on-year to 1.06 trillion won.

South Korea is the eighth largest cigarette market in the world and
more than a quarter of the population -- 13 million out of 47
million -- are smokers.

(Additional reporting by Lee Jin-won)

(US$ = 1215.3 Won)