Unfitting of Its Fame
Market industry sources said that Hong Kong-based Investment bank J.P. Morgan, which was called as “the final winner” in the global financial crisis, failed to live up to its name in the Korean market. Some say that the company showed a failure or poor performance in every deal due to the absence of Lim Suk-jung, who had led J.P. Morgan Korea over the last 20 years.
As the lead advisor, J.P. Morgan worked on the IPO of Yakjin Trading Corporation, Logen Express, Doosan Bobcat and Samsung BioLogics this year. All the deals have something in common with the difficult transaction process. The company failed to find a new owner of Yakjin Trading and decided to go public with an initial public offering (IPO) instead of the sale. It is also struggling to sell Logen Express, which was supposed to be acquired by CVC Capital Partners Ltd., a U.K.-based private equity firm.
CVC Capital Partners signed the purchase contract in September but it keeps delaying to close the deal owning to the price difference. There have been rumors in the market that CVC will cancel the contract while paying for a cancellation charge. Interestingly, CEO of CVC is Lim Suk-jung, former head of J.P. Morgan Korea.
J.P. Morgan tarnished its reputation with the first demand prediction of Doosan Bobcat. As Doosan Bobcat is based in the United States, Doosan Group also had high expectations for J.P. Morgan. However, the expectations turned into the disappointments shortly. J.P. Morgan was to sell 1,714,000 shares of Doosan Bobcat worth 702.8 billion won (US$597.62 million) to foreign investment institutions in the first IPO plan but it only sold 80 billion won (US$68.03 million) of shares. The figure is only 11.3 percent of the initial offer. Investment banking industry sources say that J.P. Morgan failed to properly sell off its acquired shares in Doosan Bobcat to foreign institutions that led to the failure in the first IPO attempt and the delay of its listing.
However, foreign stock firms’ officials say that J.P. Morgan is not the only one to blame for that considering the characteristics of IPO deals which makes commission from the sale of acquired shares. An official from a foreign securities firm said, “Doosan Bobcat had the excessively high offering prices when it first tried to go public. The calculation of offering prices without considering market situations is the biggest cause of the failure.” J.P. Morgan failed to come up with the accurate institutional demand predictions but it put up a good show as the overseas underwriter of the IPO of domestic companies this year. J.P. Morgan was the lead underwriter to list Line Corp. on the U.S. and Japanese stock market at the same time and Acushnet on the New York Stock Exchange.
Investment banking industry sources also said that the absence of Lim Suk-jung, who led J.P. Morgan Korea for 20 years from 1995 to last year, also adversely affected the deal. While Lim was head of J.P. Morgan Korea, the company monopolized Samsung Group’s deals. After closing the deal of KCC’s Samsung Everland, the current Samsung C&T, in 2012, J.P. Morgan was selected as the organizer of the IPO of Samsung SDS and Cheil Industries, the current Samsung C&T, in 2014. The company was also named as the sales advisor of Samsung Techwin and Samsung General Chemicals. However, J.P. Morgan only worked on the block deal of Shinsegae’s Samsung Life Insurance shares last year after Lim left the company.