Monthly M&A Insider - Mergermarket

Asia-Pacific
SOUTH KOREA
LG Innotek and LG Micron try to merge
once again
• On 2 April, LG Innotek, the listed South Korean
manufacturer of mobile, LCD and LED parts, announced
that it will recommence the share swap merger with listed
affiliate LG Micron, a manufacturer of shadow mask, photo
mask, and etched lead frame parts. The merger values
LG Micron at $248m (KRW 341.56bn); and the combined
company is valued at $772m (KRW 1.065trn).
• This is not the first time LG Electronics has attempted to
merge its two listed subsidiaries. In 2008, LG disclosed
its plan to exchange LG Electronics’ printed circuit board
division with LG Micron’s plasma rear panel division, and
in August 2008, LG Electronics announced its decision to
instigate merger discussions for LG Micron and LG Innotek.
The merger is part of LG Electronics’ strategic decision to
combine production of plasma display panels and plasma
rear panels. However, in December 2008, the deal lapsed
due to excessive appraisal rights payments against the
initial provision.
• In its renewed attempt to merge with LG Micron, LG
Innotek emphasised the importance of combining the parts
businesses, and commented that new regulations regarding
the payment of appraisal rights will help reduce risks for the
proposed merger by preventing massive arbitrage plays.
• A new article of the South Korea Capital Market and
Financial Investment Business Act effective from 4
February 2009 stipulates that shareholders who buy
shares in a company more than one day after a board
meeting can participate in EGMs, but will not be eligible
to receive appraisal rights to those shares. LG Innotek’s
spokesperson contends that the new regulation should
reduce the number of new investors who only aim to
arbitrage with appraisal rights.
• The appraisal right prices for LG Micron and LG Innotek
are KRW 29,011 and KRW 65,075 respectively. According
to the merger document, the deal will lapse if the total
payment for shareholders’ appraisal rights exceeds the
provision of KRW 50bn ($37.4m) – approximately 4.7% of
the valuation of the combined entity. Shareholders opposing
the merger by the EGM on 19 May will be entitled to
exercise their appraisal rights from 19 May to 9 June 2009.
Asia-Pacific
• The merger comes at a time when the LED industry
is showing rapid growth, as the LED technology is
environmentally friendly with low power consumption
and long lifetime. In mid-February, Samsung Electronics
also responded to the market trend as it reached to
an agreement with Samsung Electro-Mechanics to
establishing Samsung LED, combining the semiconductor
division of Samsung Electronics and the LED technology of
Samsung Electro-Mechanics.
SOUTH EAST ASIA
More investments for Meralco
• Filipino electric power provider Manila Electric Company
(Meralco) remains in the M&A spotlight, as it finds a new
owner in listed long-distance telecom service provider
PLDT. Following an announcement on 13 March 2009,
Piltel, a 92.81%-owned subsidiary of PLDT, will acquire
a 20% stake in Meralco in a deal valued at PHP 20bn
($414m), from the Lopez family.
• This is the third deal involving Meralco shares in 6 months.
Filipino food and beverage giant San Miguel, in its plan to
transform into a holding company, acquired a 27% stake in
Meralco in October 2008; while Global 5000 Investment,
a Filipino investment company, acquired a 10% stake in
December 2008.
• Meralco is still attracting potential investors. Metro
Pacific Investments, an affiliate of PLDT, is reported to
be interested in acquiring further stakes in the company.
Meanwhile, Meralco still shows an appetite for further
investment. Sources with the company told mergermarket
that it plans to fund its capital expenditure via the issuance
of corporate notes.
Monthly M&A report – 41