Hanwha Investment & Securities on the 19th said that regarding SILICON2(257720) securing a 300 billion won strategic investment from a global private equity manager, short-term overhang will be limited and the strategic value of preempting the European market will be greater. It maintained a Buy rating and a target price of 55,000 won. SILICON2's previous close was 44,500 won.
SILICON2 decided on a third-party allotment paid-in capital increase of 300 billion won to Starlink Investment L.P., a special purpose vehicle for investment of global private equity manager CVC Capital Partners.
It will issue 6,667,000 redeemable convertible shares (RCS) at 45,000 won per share, a 5.64% premium to the reference price. The payment date is Sept. 15, and the lock-up period is one year. SILICON2 said it plans to use all the funds raised to expand global infrastructure and market share.
CVC is the largest shareholder of Douglas, Europe's largest specialist beauty distributor, in the cosmetics industry. It is also investing in PDC Wellness and domestic color lens company Starvision.
Researcher Han Yu-jeong at Hanwha Investment & Securities said, "CVC is known not as a simple financial investor but as a manager that supports portfolio companies' overseas expansion by leveraging its global portfolio and local networks," adding, "This investment is aimed not at simply securing liquidity but at establishing a long-term partnership and securing business synergies by using CVC's global network."
In particular, SILICON2 plans to leverage CVC's network to pursue direct talks with Douglas and create sales opportunities.
Han said, "As there has been no direct transaction history to date, if results materialize, it is meaningful in that it could be added as a new direct revenue source," adding, "With the European K-beauty market expanding now, it is appropriate to invest aggressively and broaden the network."
The contractual redemption yield is low at 2% compounded annually, and the issue price is at a premium to the reference price, leading to the assessment that the fundraising terms are favorable.
If converted to common shares after Sept. 2027, there is a potential dilution of 9.23%, but short-term overhang was viewed as limited.
Han said, "At this point, we judge that the strategic value of the possibility of direct transactions with Douglas using CVC's network and of preempting the European market is greater than the dilution burden, and we view this fundraising positively."