[Market Focus] JTC Drops on 40% Discounted Tender Offer by Private Equity Fund

As of 9:50 a.m. on July 28, the share price of Japanese duty-free company JTC on the KOSDAQ market was recorded at 7,020 won, down 4.62% from the previous trading day's closing price. This appears to be due to the announcement that the second-largest shareholder, a private equity fund, will conduct a tender offer at a price discounted by approximately 40%.

On this day, JTC announced that its second-largest shareholder, domestic private equity fund (PEF) manager Affirma Capital, will acquire 10,433,500 JTC shares (a 20.2% stake) through the special purpose company Juventus Holdings Investment Purpose Company via a tender offer at 4,309 won per share. The tender offer price is 41.45% lower than the closing price of 7,360 won on the previous trading day, July 25. The total purchase amount is approximately 45 billion won. The tender offer will be conducted over a 45-day period from July 23 to September 10. The lead manager is NH Investment & Securities.

Because JTC is a Japanese corporation, under local law, more than one-third of the shares can only be acquired through a tender offer. Since Affirma Capital exercised a call option (right to demand sale of shares) for all shares held by former JTC CEO Koo Cheolmo (20,867,000 shares, a 40.33% stake), it appears that the discounted tender offer is being conducted to acquire these shares, as minority shareholders are unlikely to sell at such a low price.

Affirma Capital, which became JTC's second-largest shareholder in 2022 with an investment of 50 billion won, is expected to become the largest shareholder of JTC through the exercise of this call option. Its stake will increase from 29.2% to 69.5%. After the tender offer is completed, Affirma Capital is expected to seek to sell its stake with a management control premium attached.