LCY Chemical shares soar on acquisition deal

Taipei, Shares in Taiwan-based LCY Chemical Corp. received a significant boost from a deal in which U.S.-based investment firm KKR & Co. agreed to acquire the company at a premium of more than 17 percent over its closing price at the end of trading on Friday, dealers said.

The deal demonstrates that LCY Chemical has finally moved beyond the impact of the company's involvement in a series of explosions that resulted in 32 fatalities in Kaohsiung in 2014, they said.

Shares in LCY Chemical rose 10 percent, the maximum daily increase, to close at NT$52.50 (US$1.71) with 2.75 million shares changing hands on the Taiwan Stock Exchange, where the weighted index ended up 0.14 percent at 10,946.89 points.

Soon after the local equity market opened, the stock rose 10 percent as investors were encouraged by the acquisition deal announced on Sunday. That momentum continued until the end of the session, while the broader market moved in a narrow range throughout the session, dealers said.

"The premium represented by the acquisition price was the key to today's strong buying in LCY shares," Ta Ching Securities analyst Eric Lai said.

At a news conference held on Sunday, LCY Vice President Charles Wei (???) said LCY and KKR have signed an agreement for the U.S. investment firm to buy 100 percent of the Taiwanese chemical firm's outstanding shares for NT$47.8 billion or NT$56 per share in cash.

The acquisition price was 17.28 percent over LCY's closing price of NT$47.75 on Friday, according to Wei.

However, the acquisition price will also include a NT$2.9 cash dividend per share to be paid to shareholders, so excluding the cash dividend payout, the acquisition price will be NT$53.1, Wei said.

LCY is scheduled to go ex-dividend (when its stock price is reduced by the amount of the cash dividend per share issued to shareholders) on Friday. The cash dividends are expected to be issued within one month.

"LCY is a profitable company, which has recovered from the impact of the explosions in Kaohsiung," Lai said. "I belive, LCY has large investments in the Middle East, which is a driver to its growth."

In the first quarter of this year, LCY posted NT$1.11 in earnings per share (EPS), up from NT$0.98 over the same period of last year. In 2017, LCY's EPS stood at NT$4.20, compared with NT$4.65 seen a year earlier.

Analysts said LCY's valuation is relatively low compared with its international counterparts so the company is attractive to foreign investment firms like KKR.

Wei said LCY has scheduled a special general meeting on Sept. 10 to discuss the acquisition deal. If the deal secures approval from shareholders and supervisory authorities, it is expected to be completed by the end of this year and LCY will then delist from the local main board.

Despite the acquisition, Wei said, KKR has promised to retain the current management and workforce and that employee benefits will not be affected by the deal.

Under the guidance of KKR, Wei said, LCY is expected to become more international as the U.S. investment firm will introduce advanced management ideas, provide know-how in technology and marketing and even new funding for future operations.

Source: Focus Taiwan News Channel