Celltrion stocks soar on anticipation over intra-group merger

[Courtesy of Celltrion]

Celltrion Group stocks are on a rise, driven by the anticipation of enhanced management transparency and passive fund inflows ahead of the intra-group merger.

Shares of Celltrion Inc. closed at 183,400 won ($139.04) on Tuesday, up 3.21 percent from the previous day, marking a three-day consecutive increase. The shares hit a new 52-week high of 184,900 won during the day.

Shares of Celltrion Healthcare Co. also gained for three days in a row, closing at 80,200 won, up 1.78 percent on Tuesday.

The upward trend has been evident since last week.

Shares of Celltrion rose 6.41 percent on Friday and 5.96 percent on Monday and those of Celltrion Healthcare increased 5.72 percent and 6.63 percent, respectively.

While foreign and institutional buying continued, individual investors showed selling moves in an attempt to realize profits.

The main driver of the uptrend is the expectations surrounding the merger of Celltrion and Celltrion Healthcare.

Celltrion Healthcare is set to be absorbed by Celltrion on December 28, with the stocks listed on the Kosdaq market scheduled to be suspended from transactions starting from December 18. The new post-merger shares will be listed on January 12.

Existing Celltrion Healthcare shareholders will automatically receive Celltrion shares next year. Although there were concerns about the 7 percent stake held by the National Pension Service concerning the suggested merger, it has proceeded smoothly as there has been no exercise of stock purchase rights.

The merger is expected to lead to increased transparency in management due to a reduction in internal transactions.

According to the Fair Trade Commission, Celltrion had the highest proportion of internal transactions among domestic conglomerates at 62.5 percent.

“The merger between the two companies is expected to simplify the trading structure, enhance transparency, and secure cost competitiveness through cost rate improvement,” said Lee Hee-young, an analyst at Daishin Securities Co. “There is also a possibility of significant investment with integrated resources from the merger.

The influx of funds resulting from the merger is also considered a factor contributing to the rise in stock prices.

Korea Exchange announced that it will reflect the stock quantity following the merger in indices such as the Kospi 200, starting from Friday. The merger ratio between Celltrion and Celltrion Healthcare is 0.449262 to 1. The merger is expected to increase the total number of Celltrion’s listed shares to about 1.449262 times the current amount.

Celltrion’s market capitalization will also increase by about 45 percent, unless there is significant volatility in the stock price, expanding Celltrion’s proportion within the Kospi 200.

As of the close on Monday, Celltrion’s market capitalization stood at 26.87 trillion won, accounting for 1.48 percent within the Kospi 200 index. Assuming the stock price remains unchanged, the post-merger market capitalization would be 37.49 trillion won, with a proportion of 2.18 percent in the index.