Doosan Bobcat, the South Korean maker of earth-moving equipment, has pared back its $2.2bn public float because of low demand, marking the second big blow for the country’s equity markets this year.
The unit of South Korea’s biggest construction equipment maker had been aiming to raise Won2.45tn ($2.2bn) in what was on course to be Seoul’s largest initial public offering in six years.
The country’s markets have been seeking a boost since Lotte Group scrapped plans for a $4.5bn IPO of its hotels unit in June pending the outcome of a corruption investigation into the chaebol, South Korea’s family-run conglomerates.
Korean IPO volumes are down more than one-quarter year-on-year in 2016 so far, outpacing a global decline, and have raised just $1.7bn in the first three quarters of the year.
This latest blow also comes as bankers are preparing the sale of Samsung Biologics, a pharmaceutical contract manufacturer, and mobile game maker Netmarble Games.
Analysts said Doosan’s failure could weigh on those deals, but sources involved with the Samsung transaction reported strong early interest in its $2bn deal last week even as Doosan Bobcat’s sale was reported to be in trouble.
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Doosan Bobcat said on Monday that demand among institutional investors was lower than expected but it still planned to go ahead with a revised offering soon.
“Some factors including the number of total share did not align with market conditions, and taking this into consideration, the company will adjust the deal structure and push ahead with the IPO again,” said Doosan Bobcat.
The news dragged down the shares of its affiliates, with Doosan Engine finishing 10.6 per cent lower and Doosan Infracore down 7.1 per cent.
Seoul’s sluggish stock market was seen as a factor in the deal’s failure too.
“Investor appetite for IPOs is not so strong these days, given the Kospi’s range-bound trade,” said Lee Jae-won, an analyst at Yuanta Securities.
Doosan Bobcat, had offered shares at between Won40,000 and Won50,000 in a sell-down by existing shareholders including Doosan Infracore, the company’s largest shareholder with a 66.6 per cent stake, and Doosan Engine, another unit. Doosan Infracore planned to use its share of the proceeds to pay down debt.
Doosan Bobcat is the leading maker of small construction equipment in North America with a 41 per cent market share for skid-steer loaders.
The company reported a 5 per cent increase in first-half operating profit to Won234.8bn on sales of Won2.15tn. It generates about 70 per cent of its sales in North America.
