(2nd LD) Cheil Industries doubles IPO price on market debut

(ATTN: UPDATES figures in para 2; ADDS more details in paras 11-12, last 3 paras)

SEOUL, Dec. 18 (Yonhap) -- Cheil Industries Inc., the de facto holding firm of South Korea's top conglomerate Samsung, doubled in price on its market debut on Thursday after raising 1.5 trillion won (US$1.35 billion), the country's largest initial public offering (IPO) in four years.

Stocks of Cheil Industries were changing hands at 109,000 as of 11:16 a.m., up 2,500 won or 2.83 percent from its opening price of 106,000 won, compared with an IPO price of 53,000 won that came at the top of its marketed range. The country's key stock index, the KOSPI, edged down 0.13 percent.

The median target price for Cheil Industries offered by eight brokerage houses was 95,400 won, with some suggesting over 125,000 won.

Cheil Industries immediately became the 16th-largest market cap on the local bourse. The company is 45.56 percent owned by Samsung Group owner Lee Kun-hee and his three children. The value of their stock holdings is now estimated at some 6 trillion won.

Investors had submitted a record-high 30.06 trillion won to subscribe to Cheil Industries IPO shares during a two-day pre-order session last week. The amount surpassed the previous record 19.84 trillion won for Samsung Life Insurance Co. in 2010 and easily outdid Samsung SDS Co., another Samsung affiliate, which drew in 15.55 trillion won.

"For the owner family, Cheil Industries is very important as their stakes are very high," said Lee Kwang-soo, an analyst at Mirae Asset Securities. "Its corporate value will get a further boost from its assets and diversified portfolio."

The company, formerly known as Samsung Everland whose trademark business was zoo and amusement park operations, stands at the apex of the group's cobweb-like cross-shareholding structure. It holds a 20 percent stake in key financial unit Samsung Life Insurance Co., which in turn is a major shareholder in the group's flagship affiliate Samsung Electronics Co.

Cheil Industries' business portfolio ranges from food services and a theme park to fashion and construction. Last year, Cheil Industries posted a net profit of 96.3 billion won on sales of 3.02 trillion won.

The IPO is the second of its type by Samsung this year after one of the group's IT units, Samsung SDS Co., made its market debut last month.

The conglomerate has been seeking to transform its business portfolio and go public with some of its affiliates after the group's owner was hospitalized in May after a heart attack, apparently to help the group's management succession.

"There is a high possibility that Cheil Industries will transform into a holding firm as the elder Lee's children hold relatively high stakes (in Cheil Industries)," Kim Young-woo, a researcher at HMC Investment Securities, said, offering a target price of 100,000 won.

Calls have been growing for Samsung Group to unwind its circular shareholding structure that allows the owner family to control about 70 affiliates with a total stake of less than 2 percent. The Park Geun-hye administration is also pressuring family-owned conglomerates to adopt holding company structures to improve transparency, offering tax incentives to those who do.

Samsung is now at a crossroads, hit by a marked fall in profit in its IT business, and is eager to sort out the businesses that aren't productive so that it can focus more on those that are profitable and promising.

The group's owner Lee holds a 3.7-percent stake in Cheil Industries, and his only son and heir apparent Jay-yong has the largest portion of 25.1 percent. The elder Lee's two daughters each own 8.4 percent.

The earnings from the upcoming IPO are expected help the three younger Lees cover the inheritance taxes and other costs necessary for them to expand their control over the family business.

Analysts have speculated that the elder Lee's three children may sell some of their shares in Cheil Industries and Samsung SDS to pay for an inheritance tax bill estimated to be some 5 trillion won.

With the listing of Samsung SDS last month, the siblings' combined 19.05-percent stake in the IT solution provider was valued at approximately 4 trillion won as of Thursday.

Samsung SDS fell 3.79 percent to 279,000 won as of 11:16 a.m.

sam@yna.co.kr
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