Affinity fails in Lock&Lock tender offer; eyes equity swap
Ji-Eun Ha
Jun 06, 2024 (Gmt+09:00)
Lock&Lock's food storage containers (Courtesy of Lock&Lock) Hong Kong-based Affinity Equity Partners is planning for an equity swap between its new entity and South Korean food container maker Lock&Lock Co. to accelerate the process of delisting the household product firm from the main Kospi.
Affinity, estimated to own 86.95% of Lock&Lock, will set up a Korean entity that will acquire the food container maker’s remaining common stocks from June 7 to September 6, according to Lock&Lock’s regulatory filing on Wednesday. The offer price is 8,750 won ($6.37) per share, the same as the one in the previous two tender offer rounds.
The establishment of a Korean entity aims to accelerate the delisting process of Lock&Lock. Affinity planned to delist the subsidiary after securing at least a 95% stake, which is allowed by Korean law.
But the PE house’s ownership raised from 85.45% to an estimated 86.95% in the second-round bid which ended on June 5, amid minority shareholders’ tepid interest in the offer price.
Affinity is eyeing “all-inclusive share swap” under Korea’s Commercial Act, which enables equity swap between a subsidiary and the parent company which owns at least two-thirds of the subsidiary. The equity swap is used to quickly raise ownership of a parent or subsidiary.
As the parent company should be a Korean corporation for the share swap, Affinity is setting up a new entity in the country. Affinity will transfer Lock&Lock shares it owns to the new entity as an in-kind contribution, according to the regulatory filing.
Affinity acquired a 63.6% stake in Lock&Lock for 633 billion won in August 2017. The purchase price was 18,000 won per share at the time.
The food container maker’s stock has fallen amid competition with low-priced products from China.
The company’s earnings before interest, taxes, depreciation and amortization (EBITDA) on a consolidated basis plunged 86.6% to 7.7 billion won between 2018 and 2023. It posted a 21.1 billion won operating loss last year, its first shortfall since 2006.