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PEFs' tender offer for sake of delisting increases

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Securing targeted stake through tender offers becomes more difficult
By Anna J. Park

Private equity firms (PEFs) are increasingly initiating tender offers, or public takeover bids, over listed companies that they previously invested in, in order to delist them from Korean stock markets.

While PEFs seek tender offer bids, aiming to ease corporate restructuring and raise their invested listed firms' valuation, minority shareholders tend to be more resistant to hand over their shares, arguing tender offer prices suggested by PEFs are too low for the listed companies' own worth.

According to the investment banking industry on Wednesday, the number of tender offer cases, aimed at ultimate delisting, has reached five so far this year, already surpassing the four recorded throughout 2023.

Considering the figures from 2023, as well as from 2021 and 2022 when there were only two delistings following public buyouts per each year, the number for this year is unusually high. At the current rate, it is likely that the total number of PEFs launching tender offers could reach double digits by the end of this year.

Market watchers partially attributed the increase in such tender offer cases to the government-led Corporate Value-up Program aimed at significantly strengthening shareholder returns and rights by imposing heavier responsibilities on the part of listed companies.

Against this backdrop, PEFs seem to favor the path of delisting their invested portfolio companies from the stock markets through tender offers. The public buyouts are widely seen as a way to provide them a more efficient means of implementing necessary corporate restructuring as well as maximizing their ultimate returns from their investments into companies.

However, securing shares from minor shareholders through tender offers is becoming increasingly challenging due mostly to the strong dissatisfaction from retail shareholders over low tender offer prices.

Affinity, a Hong Kong-based PEF, had to launch a second round of a tender offer on food container maker LocknLock, which is underway until July 5, to secure its targeted stake over the firm.

The reason for the failure of the first tender offer initiative is said to be the low tender offer price of 8,700 won ($6.32), which is only about one-third of the food container company's record high of 31,965 won a few years ago.

?The latest launch of a tender offer by a PEF came earlier this week.

Archimed Group, a French PEF specializing in health care investments, announced that it began a tender offer for acquiring a 72 percent stake in Jeisys Medical, currently listed on the Kosdaq market, until July 22.

Park Ji-won


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