KT&G Skids On Icahn Stake Sale

Shares of South Korean tobacco firm KT&G Corp. skidded on news U.S. investor Carl Icahn has sold his stake in the company at a discount.

Sources familiar with the deal said Mr. Icahn sold 7 million shares of the company at 60,700 won a share, a 3.8% discount to the stock's closing price on Monday. This values the deal at 424.9 billion won ($458 million).

Mr. Icahn had widely been expected to sell out of KT&G after the company said it would return up to $2.9 billion to shareholders under pressure from Mr. Icahn and one-time ally Warren Lichtenstein.

The news of the sale, which a source familiar with the deal said took place before Tuesday's Korean market open, sent KT&G shares down by more than 4%, a day after the stock hit a record.

"The shares changed hands between foreign investors at 60,700 won," another source, who declined to be identified, told Reuters by telephone, without naming the parties involved.

On Monday, a source close to the deal told Reuters that Mr. Icahn was offering the KT&G shares, representing a 4.75% stake, in a block trade. The latest available data showed Mr. Icahn's funds owned 5.27% of KT&G.

Mr. Icahn is set to post a capital gain of about $120 million based on KT&G's estimates that Mr. Icahn's funds bought the bulk of their holdings at about 45,000 won a share.

The sale price was at the very low end of a 60,700 won-62,500 won range previously quoted by sources. Citigroup, the bookrunner for the sale, could not be reached for comment after the transaction.

The sale comes as shares in KT&G, which controls 72% of the world's seventh-largest cigarette market, hit a record high of 64,600 won on Monday.

Messers. Icahn and Lichtenstein, who led a $10 billion hostile takeover bid for KT&G, ended an alliance in August, after the firm promised to return up to $2.9 billion to shareholders by 2008, bringing its payout levels into line with peers Altria Group Inc. and British American Tobacco Plc.