South Korea's POSCO, the world's fifth-largest steel maker, is busily trying to bolster shareholder support to fend off a possible hostile takeover bid, according to officials at the company.
Analysts say POSCO is a very attractive acquisition target amid a global industry restructuring marked by the US$23 billion offer made in January by Mittal Steel, the world's top steel producer, for No. 2 Arcelor.
They also also draw parallels between POSCO, the former state-owned firm privatized in 2000, and KTG, the tobacco monopoly that was sold two years later and which is now trying to fight off a US$10 billion hostile bid by New York corporate raider Carl Icahn.
POSCO and KTG are similar in some respects -- both are market-dominant firms with high foreign shareholdings and low-priced shares, compared with their foreign rivals, some analysts say.
Foreign shareholders own more than 70 percent of POSCO. A US-based fund, Alliance Capital Management, is the steelmaker's single largest shareholder with a 6.9 percent stake.
With KTG battling tooth and nail against Icahn's bid, POSCO has decided it is better to take steps to avoid a similar fate sooner rather than later.
The company wants the country's large institutional investors such as the National Pension Service and the Military Mutual Aid Association to increase their stakes in POSCO to fend off possible takeover bids, officials said.
The stake controlled by share holders supportive of the current management is estimated at 25-30 percent, according to POSCO chief financial officer Lee Dong-Hee.
Lee said on Wednesday that POSCO seeks to boost the friendly shareholders' holding to 34 percent, the minimum required to forestall any key decisions including changes to the company constitution.
"We hope domestic institutional investors may increase their stakes in POSCO to bolster shareholder support for the current management," said Bae Hyo-seop, a POSCO publicity manager.
POSCO is recognized by industry insiders as the most efficiently run steel company in the world.
For South Koreans, the company that was formed in the 1960s, is a powerful symbol of the country's rapid drive to achieve industrialization.
The company is cash-rich, with US$4 billion in reserves and other high liquidity assets. Its debt-equity ratio stands at a healthy 25 percent.
Even so officials say they cannot rule out the possibility of a hostile bid.
"We are not entirely free from such a possibility but this is not something that we are currently faced with," Bae said.
Analysts argue that POSCO could attract other steel giants like Mittal.
"As the global restructuring of the steel industry is underway, POSCO could be an attractive target for ... other steel makers," said Kim Gyung-jung, a Samsung Securities analyst.
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