Hanwha M&S rises as much as 4% during trading

Kim Dong-sun expands tender offer from 16.06 million to 26.2 million shares

Personal funds committed to rise to about 210 billion won

Kim Dong-sun, president and head of future strategy at Hanwha Machinery & Services Holdings. [Hanwha M&S]
Kim Dong-sun, president and head of future strategy at Hanwha Machinery & Services Holdings. [Hanwha M&S]

Hanwha Machinery & Services Holdings (Hanwha M&S) surged more than 4 percent Thursday even as the broader Kospi tumbled, buoyed by expectations that an expanded tender offer by President Kim Dong-sun will enhance shareholder value.

According to Korea Exchange, Hanwha M&S was trading at 7,740 won as of 1:27 p.m. Thursday, up 300 won, or 4.03 percent, from the previous session. At the same time, Kospi had fallen 3.29 percent to 5,546.89. The tender offer news appeared to be propping up the individual stock even as broader investor sentiment deteriorated.

Kim disclosed Thursday that he is expanding his tender offer for Hanwha M&S common shares from 16.06 million shares to 26.203 million shares — equivalent to about 31 percent of all common shares outstanding. The tender offer price remains at 8,000 won per share. The expansion will increase the personal funds he commits to the purchase from about 128.5 billion won ($96.9 million) to around 210 billion won.

A tender offer is a method by which a buyer publicly announces the price, quantity and period under which it will purchase shares directly from shareholders. It is typically used to acquire management control of a company or to expand a stake, and often offers shareholders a chance to sell at a premium to the prevailing market price.

The expansion is intended to give ordinary shareholders a greater opportunity to sell their shares above the market price. About 63 percent of the 16.06 million shares Kim originally sought to acquire were already committed by Hanwha Group Senior Vice Chairman Kim Dong-kwan and Hanwha Life Insurance Vice Chairman Kim Dong-won, who had indicated they would tender their holdings. By increasing the total volume, Kim leaves more room for ordinary shareholders to sell at the above-market offer price.

Kim Dong-kwan and Kim Dong-won said they would tender 6.762 million shares and 3.381 million shares, respectively, for a combined 10.143 million shares — about 63 percent of the 16.06 million shares Kim Dong-sun had originally planned to buy. Kim expanded the offer size so that, beyond the shares sold by the two executives, ordinary shareholders would also have the chance to sell at a premium to the market price.

When Kim first announced the tender offer on Oct. 12, Hanwha M&S shares surged 24.01 percent to close at 7,540 won. The offer price of 8,000 won per share exceeded the prevailing market price, and the market interpreted the move as a signal of improved shareholder returns and accountable management. From the announcement through Wednesday, the share price had risen 22.37 percent.

The offer price of 8,000 won represents a 27 percent premium to the one-month average share price of 6,300 won as of Oct. 12. The tender offer period runs through Nov. 2.


kacew@heraldcorp.com