Shinsung Tongsang: A Second Try at Tender Offer and Privatization

• On 9 June, Shinsung Tongsang (005390 KS) announced a second tender offer after a failed attempt last year. Tender offer price is 4,100 won per share.

• The tender offer price this time (second try) is much higher than recent prices, making it much more likely that the tender offer will be successful.

• From 2019 to 2023, Top Ten's sales nearly tripled whereas Uniqlo Korea's sales declined by about 33% in the same period.

Korea's #1 Fast Fashion Apparel (Top10) (Source: Youtube)

On 9 June, Shinsung Tongsang (005390 KS) announced a second tender offer after a failed attempt last year. Tender offer price is 4,100 won per share, which is 36% higher than the closing price on 8 June. Shinsung Tongsang's share price rose limit up (30%) today closing at 3,925 won. The tender offer price is still 4.5% higher than closing price today.

Back in July 2024, the company's first tender offer failed because the tender offer price back then (2,300 won) was too low. In the end, the first tender offer only secured an additional 5.89% of shares. As a result, the owner's family's stake increased from 77.98% to 83.88%, but it ended up falling short of the delisting requirement of 95%.

In this second try at tender offer, the tender offer price is much higher than recent prices, making it much more likely that the tender offer will be successful. After the successful tender offer, Shinsung Tongsang plans to delist the company.

This time around, Shinsung Tongsang’s voluntary delisting attempt is expected to pass without much difficulty. Even if they fail to secure a 95% stake through a tender offer, the owner family with an 80% or higher stake can achieve delisting through a comprehensive stock swap.

A comprehensive stock swap refers to the exchange of other shareholders’ stakes for stocks of the parent company or cash when the largest shareholder holds more than two-thirds of the stake.

From Chairman Yeom Tae-Soon and his family's perspective, if they had offered a higher tender offer price in the first tender offer, they could have taken the company private much more easily and at cheaper price. Now that they are trying to complete this tender offer once again, they are likely to succeed, albeit at more costly price.

One of the major reasons why the company is trying to complete this tender offer once again may be due to the controlling family's succession plans of handing down the business to the Chairman Yeom Tae-Soon's only son prior to the revision of the Commercial Act goes into effect. One of the revisions of the Commercial Act currently being discussed in the National Assembly includes provisions to strengthen the rights of minority shareholders and the concentrated voting system.