Shares in KT&G Corp soared yesterday after investors led by US billionaire Carl Icahn made an unsolicited offer to acquire South Korea's former government tobacco monopoly.
KT&G shares jumped 11 percent to close at 57,000 won (US$59) in Seoul.
Icahn and other investors in the company on Thursday proposed in a letter to chief executive Kwak Young-kyoon an offer of 60,000 won a share for the company, which has businesses ranging from tobacco to products related to the ginseng root, popular in Asia for its perceived health benefits.
PHOTO: AP
KT&G has 162.44 million shares, according to the Korea Exchange, which means the company would be valued at about 9.75 trillion won at current exchange rates at such a share price.
If successful, the deal would be the first unsolicited takeover of a major Korean company by overseas investors.
Three funds controlled by the billionaire investor, including Icahn Partners Master Fund LP, and another fund, Steel Partners II LP, have become the second-largest holders of KT&G, amassing 10.7 million shares, or 6.59 percent of the company's total since last year.
The investors have been calling for KT&G to float shares in its ginseng subsidiary and to sell landholdings to improve the company's share price.
Kwak has so far rebuffed those proposals.
The proposal comes ahead of KT&G's annual shareholders' meeting on March 17. The investors earlier this month nominated three people to compete for two openings for outside directors on the company's board.
Icahn, known in the US for his numerous attempts to shake up corporate boardrooms, has recently made headlines by leading investors seeking change at media giant Time Warner Inc. But such shareholder activism is rare in South Korea.
According to KT&G, foreign investors owned 63 percent of the company as of the end of last year. The biggest investor is Franklin Mutual Advisers LLC with a stake of 8.14 percent. After Icahn's group, the third-largest is Industrial Bank of Korea at 5.85 percent.
"You have flatly refused to listen to any of the proposals that we have made," Warren Lichtenstein, managing member of Steel Partners and one of the board nominees, said in a separate letter to Kwak. "In light of this, we have determined to make a proposal to acquire KT&G."
The contents of the letters were included in a press release by the four funds, identifying themselves as the KT&G Full Value Committee.
The funds said they were prepared to put up about US$2 billion of their own funds, adding they believe that additional debt financing "will be readily available."
They called on KT&G respond to the proposal by the close of business next Tuesday. KT&G said it planned to review the proposal with the help of its financial and legal advisors.
Separately, South Korea's Financial Supervisory Service, the country's financial regulator, said the offer wasn't official as proper documents had yet to be received.
"We haven't received any application related to the buyout offer," an FSS official told Dow Jones Newswires. "It lacks formality at the moment."
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