[Intl-tobacco] Korea: Price dooms Korea Tobacco share sale

[Robert Weissman]

Price dooms Korea Tobacco share sale
Source: Daily Deal, 2002-06-24, via tobacco.org
http://www.thedeal.com/NASApp/cs/ContentServer?pagename=TheDeal/TDDArticle/StandardArticle&Box1=NULL&Box2=NULL&banner=NULL&c=TDDArticle&cid=1024657983263

03:56 PM EST, Jun-23-2002

SEOUL - A high price was blamed for the South Korean government's
failure to sell its 22.2 million shares in Korea Tobacco & Ginseng
Corp., that were offered to investors Friday and Saturday as part
of the company's privatization efforts.

The shares represented a 7.7% stake that the government had in the
country's sole cigarette manufacturer. The government's failure to
sell Korea Tobacco shares does not bode well for a 14% stake sale
to overseas buyers in July valued at $350 million.

The Finance Ministry said in a statement about last week's offering
that only 9.2 million shares, priced at W16,200 ($13.27) each, were
sold to employees and individual investors. The pricing of the
shares was done Thursday and represents a premium over that day's
closing stock price of W15,500 ($12.70).

Because of the offering's poor performance, the South Korean
government will offer the unsold 13 million shares through
exchangeable bonds Tuesday. That number will be added to the
exchangeable bonds that were already scheduled to be sold Tuesday.

The Finance Ministry said it expects the bond sale, which can be
converted into Korea Tobacco shares at W17,820 each, to be a
success because of the high yield rate of 5.7%. The bonds have an
annual coupon rate of 3% and will mature June 29, 2005.

The government had originally planned to sell a 19.3% stake in
Korea Tobacco this month through company shares and exchangeable
bonds to raise $500 million.

On Thursday, institutional investors bid for 9.3 times the 7.4
million shares in Korea Tobacco that were offered to them.

But despite the fact that Korea Tobacco posted a net first quarter
profit of W112 billion ($91.8 million) this year, employees and
individual investors were not as attracted to the offering.
Analysts blame the high premium price.

"It wasn't seen as an attractive buy," one analyst at Samsung
Securities said. "The government should not have been so
ambitious."

Hyundai Securities Co., Dongwon Securities Co., Samsung Securities
Co. and LG Securities Co. are managing the domestic sale.

UBS Warburg, Goldman Sachs & Co., Hyundai Securities and Dongwon
Securities will arrange the overseas stake sale, which will be done
through the issuance of global depositary receipts.

Before the sale, the government owned a total 33.3% stake in Korea
Tobacco through government-run banks. The Industrial Bank of Korea
owns 19% of Korea Tobacco, while the Korea Development Bank and the
Export-Import Bank of Korea each hold a 7% stake.