From Homeplus to Lotte Insurance... Deal Activity Set to Accelerate After Chuseok [fn Market Watch]

[Financial News] South Korea's investment banking (IB) market is entering its main phase after the Chuseok holiday. As year-end approaches, major M&A targets—including Lotte Insurance, Haitai HTB, Homeplus and JoongAng Ilbo—are moving on to their next stages one after another. The IPO market is also seeing a concentration of October bookbuilding. Whether the gap in valuation expectations between sellers and investors narrows enough to produce actual deals will be the key variable in the fourth-quarter IB market.
According to investment banking industry sources on the 25th, the sales of Lotte Insurance and Haitai HTB will reach key turning points after Chuseok.
JKL Partners is currently pursuing a public sale of Lotte Insurance, with Samjong KPMG serving as the lead adviser. After exclusive talks with Shinhan Financial Group broke down over a price gap, the process shifted to competitive bidding. The transaction price is estimated within the investment banking industry to be around 1 trillion won. The key question is whether potential bidders, including financial companies, will actually participate and create a competitive bidding process.
Haitai HTB, the beverage subsidiary of LG Household & Health Care, is also set to enter final bidding. Mega MGC Coffee and Godo Partners were shortlisted and conducted due diligence. The seller's expected price is reportedly around 300 billion won. The focus is on how much prospective buyers will reflect the brand value of Pear Puree Drink, Bon Bon and Coco Palm, as well as the company's growth prospects after becoming independent, in their offers.
In the resale of Homeplus, structuring the deal is considered more important than finding buyers. The lead adviser, Samil PwC, sent teaser letters to about 50 domestic and overseas strategic investors (SIs) and financial investors (FIs). Hypermarkets and the headquarters and online businesses will form the basic package, while options to separate some businesses or assets have also been left open.
Because the transaction requires not only the acquisition price but also funds to normalize operations, matching the buyers' financial capacity with the scope of the acquisition is expected to determine the deal's success. After two previous sale attempts fell through, attention is also focused on how many actual bidders will emerge after Chuseok.
The sale of JoongAng Ilbo, which is undergoing a corporate restructuring program known as a workout, will also pick up speed from October. Orion, Daou Technology, GLOBAL SAE-A, OK Financial Group, eBroadcasting (3PROTV) and Geumbo Development have submitted letters of intent (LOIs). The six parties are expected to enter the final bidding contest after full due diligence. Since the transaction involves a company under a workout program, the bid prices and deal structures proposed by each candidate after due diligence are likely to be key variables.
The IPO market, meanwhile, also has a packed schedule immediately after the holiday. Starting with Elice Group, numerous companies—including DTS, Dabeeo, EUCAST, TNE Korea, Creatz and Lablup—will conduct bookbuilding and public subscriptions in October.
An IB industry official said, "Ultimately, the key is not the subscription competition ratio but 'IPO pricing expectations.' The year-end IPO market's mood will depend on how willing institutional investors are to accept valuations at or above the upper end of the target offering-price range."
The official continued, "After Chuseok, assets that have been on the market will move into the stage of confirming their actual prices," and added, "The direction of the year-end deal market will depend on how much investors are willing to accept for both M&A acquisition prices and IPO offering prices."
[email protected] Kim Kyung-a Reporter