Brokerage firm Hanyang Securities' 11.3% stake up for sale

South Korea’s Hanyang University Foundation has decided to sell 11.3% of common shares and all the preferred stocks it holds in brokerage arm Hanyang Securities Co. to back the foundation’s units struggling with a liquidity crunch.

The foundation said on Friday that it has determined to cut its ownership in common shares of Hanyang Securities, the 30th-largest brokerage house in Korea, to 4.99% from the current 16.29%.

The largest shareholder of Hanyang Securities is expected to secure around 16.6 billion won ($12 million) by divesting of 15.5 billion won worth of common stocks and 1 billion won worth of preferred shares.

The divestment comprises 1.44 million common stocks for 10,803 won apiece and 76,435 preferred shares for 13,483 won apiece, based on the brokerage firm’s stock price for four months from the end of February, the foundation said.

The deal value is likely to exceed 16.6 billion won, considering the management premium and that Hanyang Securities’ stock has surged around 38% since news of the divestment was released earlier this month, investment banking sources said.

“We expect to receive approval from the Ministry of Education soon; the sale process will start after winning the approval,” said an official from the foundation.

LIQUIDITY PROBLEMS

The foundation plans to use half of the proceeds for Hanyang University and Hanyang University Hospital in liquidity risks and deposit the other half, according to the disclosure.

It will hold 16.6 billion won of the total value of the sale for deposit if 50% of the divestment falls short of the expected value, the foundation added.

“We are facing great difficulties in the financial management of the educational foundation and affiliates amid the global economic downturn following the pandemic,” it said, adding that Hanyang University is financially challenged due to a tuition freeze for 16 straight years.

The hospital has been operating at a loss in recent years due to aging facilities and poor conditions, and junior doctors quitting en masse has made the situation worse, the foundation explained.

“Hanyang University Hospital is grappling with a liquidity crunch as it has logged a 500 million won loss every month this year,” an official from the hospital said. “The foundation plans to secure cash in preparation for various situations, such as support to the hospital,” the official added.

The foundation didn’t disclose details of the equity sale such as the timeline and potential bidders, but Seoul-based private equity firm KCGI, logistics-to-trading conglomerate LX Group and Woori Financial Group are considering bidding for Hanyang Securities, according to banking sources.

Last year, Hanyang Securities posted 46.3 billion won in operating profit, up 24.5% on-year, and 999 billion won in revenue, down 10.6% from the year-earlier period.

The brokerage firm logged 19.6 billion won in operating profit and 192.8 billion won in revenue for the first quarter of this year.

Write to Jong-Kwan Park at pjk@hankyung.com

Jihyun Kim edited this article.