Seoul Guarantee Insurance to raise $124 million from IPO

Seoul Guarantee Insurance Co. (SGI) will raise 181.5 billion won ($124.2 million) through an initial public offering later this month in its second attempt to go public after calling off the previous IPO plan in 2023 due to tepid demand.

The South Korean guarantee insurer announced on Tuesday that it set its IPO price at the bottom end of its indicative 26,000-31,800 won band, slashed by nearly 40% from its previous target value suggested in October 2023 to kindle investor interest.

Its market capitalization will hit 1.82 trillion won upon its March 14 debut on the country’s main Kospi market.

BOTTOM END

Its Feb. 20-26 bookbuilding sessions attracted 1,509 institutional investors at home and abroad, recording a 204.8:1 competition ratio, the company said. 

Nearly 82% of the investors offered the IPO price at the bottom end. 

It signed 136 lock-up agreements, accounting for 16.3% of its entire shares to be offered. More than half of the contracts include agreements to keep the shares for three months or longer after the listing.

A lock-up agreement is generally signed to prevent insiders or institutional investors from selling a company’s shares for a specified period after an IPO to ease market volatility.

Seoul Guarantee Insurance will sell 6,982,160 existing shares owned by Korea Deposit Insurance Corp. (KDIC) during the IPO.

Seoul Guarantee Insurance was born through a merger of two ailing Korean guarantee insurers, which state-owned KDIC bailed out with an injection of 10.25 trillion won in the wake of the 1997-98 Asian financial crisis.

The shares being offered represent a 10% stake in SGI from KDIC, which controls 93.85% of the insurance company.

HIGH DIVIDEND PAYOUT RATIO

To entice investor interest, Seoul Guarantee Insurance in January vowed to pay 200 billion won in dividends for 2024 earnings, equivalent to a dividend yield of about 11% for its IPO subscribers.

The company’s dividend payout ratio over the past 13 years averaged 53.5%.

It also unveiled a plan to return 200 billion won to shareholders every year until 2027 through dividend payouts and stock retirements.

Once Seoul Guarantee Insurance is listed, it will be the first state-owned company to go public in Korea in 15 years. Korea District Heating Corp.'s IPO was in 2010.

Its public subscription for retail investors is scheduled for March 5-6.

The IPO underwriters are Samsung Securities Co. and Mirae Asset Securities Co.

Write to Seok-Cheol Choi at dolsoi@hankyung.com

Sookyung Seo edited this article.