Ostem Surpasses Success Threshold for Tender Offer Volume... Will Not Retry if Failed

MBK "Focus on Corporate Governance and Management Improvement Upon Successful Tender Offer"

[Asia Economy Reporter Kwangho Lee] Private equity firms MBK Partners and UCK (Unison Capital Korea) are in the process of acquiring management rights of Osstem Implant, and the first week of the tender offer has shown positive trading volume.

On the 25th, MBK Partners and UCK established a special purpose company (SPC) called 'Dentistry Investment Co., Ltd.' (hereafter Dentistry) and began a one-month tender offer aiming to acquire management rights of Osstem Implant. The target purchase is approximately 15.4% to 71.8% of Osstem Implant's potential total issued shares (15,576,505 shares), with a purchase price of 190,000 KRW per share.

During the first three days starting from the 25th, the trading volume of Osstem Implant on the KOSDAQ market was recorded at 2,535,434 shares. This exceeds the minimum quantity required for a successful tender offer of 2,394,782 shares by more than 140,000 shares.

During this period, individual investors sold 1,607,053 shares. Financial investors and private equity funds purchased 1,152,106 shares, absorbing the individual investors' sell volume. Since individuals participating in the tender offer, which is considered an over-the-counter transaction, must pay a 22% capital gains tax on profits, they appear to have chosen to sell on the market instead.

Typically, the shares offered by individuals on the market are bought by institutional investors aiming for about 1% profit through arbitrage. Given that the tender offer targets mainly institutions, the higher the trading volume between them and individuals, the greater the likelihood of a successful tender offer.

However, it is still too early to judge success. The activist fund KCGI recently purchased shares with the purpose of 'management influence,' causing Osstem Implant's stock price to surge close to the tender offer price. If the stock price exceeds 190,000 KRW, the incentive to participate in the tender offer disappears.

MBK Partners has stated that if this tender offer fails, they will not attempt another one. Kim Kwang-il, CEO of MBK Partners, said, "Dentistry has offered a management premium price, usually provided only to the largest shareholder of a listed company, to general shareholders as well, considering the recent rise in stock price. If the Osstem Implant tender offer succeeds, we will focus on improving corporate governance and management from a mid- to long-term perspective."