Korea’s E-Mart to delist troubled building unit for restructuring

Shinsegae E&C shares hit five-month high after E-Mart announces tender offer plan

Starfield shopping mall in South Korea built by Shinsegae E&C (File photo by Shinsegae E&C)
Starfield shopping mall in South Korea built by Shinsegae E&C (File photo by Shinsegae E&C)
Ahla Cho 2
2024-09-30 16:41:40 rrang123@hankyung.com
Corporate restructuring

South Korea’s largest supermarket chain E-Mart Inc. said on Monday it is set to delist its troubled construction subsidiary from the main local stock market after a 38.8 billion won ($29.7 million) tender offer, sending the company’s share prices to a four-month high.

E-Mart said in a regulatory filing that its board of directors on Friday has decided to buy a 27.33% stake in Shinsegae Engineering & Construction Co. (Shinsegae E&C), or 2.12 million ordinary shares at 18,300 won per stock, a 19.06% premium over the company’s last closing price.

Shinhan Securities Co. is managing the tender offer.

The tender offer will raise E-Mart’s stake in the builder to 97.79% from the current 70.46%, helping the parent meet the requirement of holding 95% for delisting.

After the announcement, Shinsegae E&C’s shares soared by 14.26% to 18,340 won on Monday, the highest since May 30. Shares closed up 13.15% at 18,160 won, far outperforming a 2.13% loss in the benchmark Kospi.

“The leadership is so determined to normalize the management of Shinsegae E&C as soon as possible that they decided to delist the company,” said an E-Mart official.

RESTRUCTURING FOR PROFITABILITY

The builder reported massive operating losses in 2022 and 2023 amid difficulties in the local real estate project financing sector and the domestic property market downturn, hurting E-Mart’s balance sheet. The hypermarket chain operator logged its first annual loss last year due to the subsidiary’s sluggish earnings.

Chung Yong-jin, chairman of South Korea’s retail giant Shinsegae Group, is the largest shareholder in E-Mart, and the group has been providing financial support to the construction unit.

Shinsegae E&C significantly improved its financial stability by securing more than 1 trillion won in liquidity this year.

The group aims to restructure the builder with a focus on profitability and speed up its revised mid- to long-term business strategies after the delisting.

E-Mart plans to hold a Shinsegae E&C shareholders’ meeting in November to delist the company once it secures a 95% stake or more through the tender offer.

Write to Ahla Cho at rrang123@hankyung.com
 
Jongwoo Cheon edited this article.
#Korea #retail #construction #EMart #Shinsegae #builders #tender #offer #delist #resructuring #debt #liquidity #losses #earnings #profits #financial #support #profitability

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