Goldman Sachs has sold its remaining stake in Korea’s Hana Financial Group through a W370.03 billion ($329 million) self-led block trade that was completed last night. The deal was triggered by reverse inquiries after the share price had risen 18.3% during the past four weeks and was several times covered, according to a source.
The level of demand allowed Goldman to fix the price just above the mid-point of the price range for a 3% discount.
The uncertainties surrounding Hana has cleared in recent weeks after the Korean financial holding company finally got regulatory approval to buy Lone Star’s majority stake in Korea Exchange Bank (KEB). The acquisition, which was agreed in November 2010, will cement Hana’s position as one of the top financial holding companies in Korea — Hana Bank is the fourth-biggest bank in Korea, while KEB is the fifth largest.
Hana also released its fourth-quarter earnings report on Thursday last week. Net profit increased by 11% but fell short of expectations and loan loss provisions was up from the third quarter to meet stricter government rules on capital. However, investors appeared happy to get the report out of the way and move on. The share price gained 0.1% yesterday after falling 2.7% on Friday.
Meanwhile, the deal will remove a slight overhang on the stock that was created when Goldman sold close to half its stake in the company in April last year. That should make Hana a bit more attractive for investors.
The offering accounted for about 3.9% of Hana’s outstanding share capital and comprised 9.5 million shares. They were offered at a price between W38,500 and W39,300, which translated into a discount of 2.1% to 4.1% versus yesterday’s close of W40,150.
The price was fixed at W38.950, resulting in a 3% discount. This was significantly tighter than the 6.5% discount that Goldman achieved when it sold a 3.1% stake in late April, but the price was lower this time. The first sale totalled $298 million and was offered at a fixed price of W43,000 per share.
The source said that many investors were focused on an absolute price and saw good value at current levels. That allowed the discount to be kept quite tight.
Hana is also a big and relatively liquid name — the offering accounted for about seven days of trading volume — and hence an attractive stock to buy for investors who are trying to catch up with the recent stock market rally. According to Bloomberg data, there are 36 “buys” on Hana and only six “holds”. None of the analysts following the company recommends investors to sell. The average 12-month target price is W51,011, suggesting 27% upside from yesterday’s close.
While there are still a lot of uncertainties with regard to the debt situation in Europe, the news flow has become less gloomy and Asian markets are relatively well bid at the moment. The Korean stock market has gained 9.9% year-to-date, while Hong Kong is up 13.3% and Singapore has added 12.2%.
There seems to be a growing belief that share prices will not return to their December levels and, according to bankers, investors are looking to put on risk again — albeit selectively. One sign of this is that the universe of participants in block trades is growing again after shrinking quite significantly in the first few trades this year.
Last night’s deal attracted about 80 investors, including a number of existing shareholders. The reverse inquiries, which came from two different accounts, were said to have covered more than half of the transaction, but there was a lot of incremental demand as well, both from long-only investors and hedge funds. High-quality global accounts featured quite heavily, but there was also good participation from large domestic accounts, and as usual, the bulk of the deal went to Asia including Korea, the source said. The order book closed after about three-an-a-half hours for Asian investors, but was kept open for an additional three hours to give US investors a decent chance to look at the deal.
Goldman Sachs invested about $520 million in the Hana group in 2005 to help fund the company’s acquisition of Daehen Investment & Securities. This gave it an initial stake of around 9.5%, which was later diluted down to the 7.55% that the US investment bank held before its first sell-down in April. Given that the two sell-downs combined have brought in $627 million, Goldman has made a return of about 20% on its investment, before taking into account dividends or exchange rate gains.
Aside from the $3.48 billion KEB acquisition, Hana last week signed a memorandum of understanding to buy a 51% stake in US-based Saehan Bancorp. The acquisition will allow it to regain a presence in the US and to leverage KEB’s extensive overseas network that spans 22 countries around the world.
According to a written comment by Hana’s chairman, Seung Yu Kim, issued in connection with the Saehan MOU, Hana has been “particularly successful in leveraging global business opportunities in Asia through its subsidiaries in China and Indonesia and is fully committed to playing a major role in providing diversified financial services to Korea-US trade businesses.”
