POSCO Holdings (005490.KS) is raising about 2.5 trillion won ($1.8 billion) by tapping its stakes in subsidiaries POSCO International (047050.KS) and POSCO DX (022100.KS). The move is seen as part of a plan to cut its holdings in listed affiliates to around 50% by 2027. POSCO Holdings intends to use the proceeds for strategic investment and other purposes to enhance shareholder value.
According to investment banking sources, POSCO Holdings held a board meeting on the 7th of this month and approved a proposal to dispose of its stakes in POSCO International and POSCO DX through price return swaps (PRS). Specifically, it will sell 36,434,963 common shares of POSCO International at 55,400 won per share and 23,385,917 common shares of POSCO DX at 20,600 won per share. The disposal is scheduled for September 7 and is expected to bring in a total of 2.5002 trillion won.
The deal is structured so that five domestic brokerages acquire the POSCO International and POSCO DX stakes before reselling them to institutional investors. KB Securities, Kiwoom Securities, NH Investment & Securities, Meritz Securities and Mirae Asset Securities are said to have been in talks with POSCO Holdings since early last month, discussing the acquisition size and interest rates. An investment banking source explained, "KB Securities, Kiwoom Securities and Meritz Securities took on most of the volume, and the negotiations were completed with NH Investment & Securities and Mirae Asset Securities in supporting roles."
The market had largely anticipated POSCO Holdings' sale of stakes in its listed affiliates. In a conference call early last month, POSCO Holdings said it would cut its holdings in units including POSCO International, POSCO DX and POSCO Future M to around 50% by the end of next year. The aim is understood to be resolving the holding-company discount and enhancing shareholder value by using the sale proceeds for strategic investment.
The PRS carries a three-year maturity, at which point gains or losses from changes in the share prices of POSCO International and POSCO DX can be settled. A PRS is a derivative in which the issuer keeps the difference if the share price at settlement is higher than at the time of the contract, and the issuer compensates the brokerage for the difference in the opposite case. It has become a favored funding method recently because it can reduce the impact on share prices compared with a block deal, an off-hours bulk sale of shares.
