The Doosan headquarters building in Jung-gu, Seoul. Doosan
Shares of Doosan (000150.KS), which acquired a 70.6% stake in SK Siltron for 2.3 trillion won, are rising more than 5%. Analysts assessed that the company acquired SK Siltron at a reasonable price amid expectations that wafer demand will increase on the growth of the artificial intelligence (AI) industry.
According to the Korea Exchange on the 3rd, Doosan shares were trading at 1,233,000 won, up 59,000 won (5.04%) from the previous session. At one point, the stock surged to 1,293,000 won.
Doosan’s strength on this day is being attributed to the SK Siltron acquisition. On the 31st of last month, Doosan agreed to purchase a 70.6% stake in Siltron from SK for approximately 2.3 trillion won. The two sides established an “excess profit-sharing earn-out” as a supplementary mechanism. Under the structure, if Siltron’s earnings exceed an agreed benchmark, SK shares a portion of the profits.
Siltron, a specialized semiconductor wafer company, ranks third in the world by market share based on 12-inch wafers. Doosan Group previously acquired Doosan Tesna and Enzion in succession, and by taking in Siltron this time, it has completed the entire semiconductor value chain — from wafers, a front-end material, to copper clad laminate (CCL), a substrate material, and back-end testing.
Major securities firms including NH Investment & Securities uniformly maintained buy ratings on Doosan or raised their target prices, viewing the acquisition positively. Analysts cited the acquisition price being set lower than the market had expected, the contract structure being designed in Doosan’s favor, and the acquisition of only the profitable business with the loss-making business separated out.
Applying next year’s expected earnings before interest, taxes, depreciation and amortization (EBITDA) of 726 billion won, the enterprise value-to-EBITDA (EV/EBITDA) ratio stands at about 8.1 times. This is below the 10.2 times average for next year among global wafer competitors such as Shin-Etsu, SUMCO, and GlobalWafers.
“The base equity value was calculated at a lower level than the amounts that had been discussed in the existing market, easing concerns over the cash burden,” said Kwon Min-kyu, an analyst at Kiwoom Securities. “Having pulled off a sound acquisition centered on core assets and bought it well at a low price, it is now time for Doosan’s corporate value to be re-evaluated.”
“By paying 10% of the deposit immediately after the contract and paying the remaining 90% balance at the transaction closing date early next year, immediate cash outflow was reduced,” said Lee Kyung-yeon, an analyst at Daishin Securities. “The contingent consideration method shares the upside with SK but carries no downside burden, a structure designed in Doosan’s favor.”