Bloomberg News

CJ CheilJedang Falls After Beating Posco to Korea Express

June 29, 2011

(Closes shares in second, fifth paragraphs.)

June 29 (Bloomberg) -- CJ CheilJedang Corp., South Korea’s largest foodmaker by market value, dropped to a two-month low in Seoul trading after being named preferred bidder for a stake in Korea Express Co., the nation’s biggest logistics company.

The foodmaker was the worst performer on the MSCI Asia Pacific Index, after falling 6.4 percent to its lowest since April 28. Korea Express Co. dropped 5.9 percent to 104,500 won.

CJ Cheiljedang and CJ Corp. are set to buy about 40 percent of Korea Express after beating out a rival offer from a Posco- Samsung Group venture. The winners bid about 2 trillion won ($1.86 billion), about double the stake’s market value, Korea Economic Daily reported, without saying how it got the information.

“There are concerns that CJ CheilJedang is paying too high a price,” said Shin Ji Yoon, an analyst at KTB Securities in Seoul. “There are also doubts about how much the acquisition will help Korea Express build up its business.”

CJ Cheiljedang declined to 234,000 won at the 3 p.m. close in Seoul trading. CJ Corp. gained 0.6 percent to 73,400 won.

CJ Group made a “reasonable” offer for the Korea Express stake, CJ Corp. Chief Executive Officer Lee Gwan Hun told reporters in Seoul today, without elaboration.

The group plans to grow Korea Express’s sales to 20 trillion won by 2020, it said in a statement. The Seoul-based logistics company posted sales of 2.1 trillion won last year.

“There is no need to worry about our funding plans,” Lee said. “We see no problem raising the money.”

Express Network

Korea Express has terminals in South Korea’s biggest ports, 10,000 express-delivery outlets and more than 5,000 trucks, according to its website. Its market value was $2.21 billion, according to data compiled by Bloomberg.

CJ Group will use Samsung Life Insurance Co. shares and other non-core assets to help fund the acquisition, Seong Yong Jun, executive vice president of CJ Corp., told reporters. Possible options include the sale of bonds that could be exchanged for the life insurer’s shares, he said.

“We are considering all options to minimize any negative impact this may have on Samsung Life shares,” Seong said. CJ CheilJedang and CJ Corp. own a combined 5.5 percent of Samsung Life, South Korea’s biggest life insurer.

CJ Corp. and CJ CheilJedang will buy the Korea Express stake from Asiana Airlines Inc. and Daewoo Engineering & Construction Co. A preliminary agreement will be signed next month, sale arranger Korea Development Bank said yesterday.

Other CJ Group investments include a TV shopping network, an animal-feed maker, a cinema chain and Korean outlets for ice- cream seller Cold Stone Creamery.

--Editors: Neil Denslow, Subramaniam Sharma.

To contact the reporter on this story: Kyunghee Park in Singapore at kpark3@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net


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