By Lee Hyo-sik
Staff Reporter


Sovereign Asset Management unloaded its stake in LG’s two flagship companies Tuesday, incurring an estimated 50.2 billion won ($48 million) loss as LG share prices fell since its stake purchase in February.

The Dubai-based investment fund sold its 7 percent stake in LG Corp. and another 7.2 percent stake in LG Electronics to a group of foreign investors in pre-hours trading, according to the Korea Exchange (KRX) on Tuesday.

The sales came three weeks after Sovereign changed the purpose of its investment in two key units of LG Group, South Korea’s third largest family-controlled conglomerate, to simple investment from management participation.

Revised Korea stock rules require investors holding 5 percent or more of a public company and who want to exercise basic shareholder rights, such as nominating directors or changing the articles of incorporation, to file a declaration that they intend to participate in management.

Sovereign disposed of its entire 12 million shares in LG Corp., the holding company of LG Group, at a 4.9 percent discounted price of 24,910 won from the previous day’s close, generating 300.9 billion won, according to the KRX.

It also earned 623.8 billion won from the sale of some 10 million shares of LG Electronics, the country’s second-largest electronics marker, at a 3.8-percent discounted price of 62,000 won.

The investment fund made the combined 924.7 billion won from the stake sale of the two LG companies, 50.2 billion won short of its initial investment of 974.9 billion won as LG Electronics shares lost about 10,000 won since Sovereign’s stake purchase in February.

It made capital gains of 51.3 billion won from LG Corp. stake sales, but it lost 101.6 billion won from the equity investment in LG Electronics.

Shares of LG Electronics lost 1,300 won, or 2 percent, to close at 63,200 won Tuesday, while LG Corp. saw its shares remain at 12,600 won unchanged from the previous day.

Analysts said that the Sovereign factor will unlikely weigh down on LG shares in a longer term even if shares may temporarily remain weak.

``The market has expected Sovereign to dump LG shares sooner or later as private equity funds always seek to generate a short-term capital gains from equity investments and then leave. Sovereign’s sale has nothing to do with the company fundamentals,’’ said Kang Hyun-cheol, an analyst at Woori Investment & Securities.

Kang added that LG’s share price will show an upward trend in line with a generally bullish market movement in the near future as the two LG firms are different from SK Corp., which endured the two-year long fight with Sovereign over various management issues.

In late July, the investment fund sold its entire 14.82 percent stake in SK Corp., the nation’s largest oil refiner, worth 946 billion won ($910 million), realizing as much as 750 billion won in stock investment gains, It paid an average of 9,000 won per share to buy 19.03 million SK Corp. shares from March to April 2003.

It sold SK stakes as it failed to oust the refiner’s chairman Chey Tae-won from the board at the two general shareholders meeting since last year and the Seoul high court suspended Chey’s jail term in May for his role in the accounting fraud for five years.

leehs@koreatimes.co.kr