Woongjin struggles to unload Coway

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Woongjin struggles to unload Coway

By Nam Hyun-woo

Woongjin Group Chairman Yoon Seok-kum
Woongjin Group is having a hard time trying to unload its flagship unit Woongjin Coway as no one wants to pay the price Woongjin set for the nation's home appliance rental firm, according to industry analysts Tuesday.

The mid-tier business group, which is desperate to secure fresh funds to resolve its worsening liquidity problems, is asking for 1.7 trillion won for its 25.08 percent stake in Coway. But potential buyers are in no rush because they expect Woongjin to lower the price tag as time drags on, they said.

In a bid to facilitate the sale, the group recently appointed an M&A specialist as a co-CEO of the company. It has named Ahn Ji-yong as its co-CEO in charge of management and marketing. Existing CEO Lee Hae-sun will lead R&D, production and operations.

Ahn was Woongjin Group's head of the planning and coordination office and played a key role when the group bought Coway for 1.8 trillion won in March. In June, the group announced it will sell its 25.08 percent stake in Coway as it fell short of liquidity.

Woongjin Coway co-CEO Ahn Ji-yong
Ahn's appointment is being interpreted as the group's intention to prevent Coway's sales process being swayed by shortlisted buyers, but industry officials say buyers have the upper hand due to the group's financial problems.

According to sources, the deal's lead manager Korea Investment & Securities has selected four companies and funds as shortlisted buyers. They are SK Networks, Haier, the Carlyle Group and Bain Capital.

Despite Coway being a lucrative company ― Korea's No. 1 home appliance rental service firm with an operating profit for the first half standing at 273.4 billion won ― only seven entities have sent the manager a letter of intent, while shortlisted firms' intent to acquire Coway is being questioned.

Both SK Networks and Haier have attempted to acquire Coway in the past, but have withdrawn from their bidding. SK Networks made its bid in 2012, when Woongjin Group sold Coway to private equity firm MBK Partners, and Heier tried in 2015 when MBK Partners first tried to sell Woongjin Coway.

"Given their previous records of not finishing their race for the Coway acquisition, it is hard to tell whether the two companies seriously want the rental firm," said an industry official who declined to be named.

For the two private equity funds (PEFs), Coway employees have already expressed their opposition. "For the past six years, MBK Partners have neglected R&D to squeeze out profit and we have already seen many firms acquired by PEFs suffering problems in job security," Coway union said in a statement.

While buyers' intention to purchase Coway is facing questions or opposition from employees, time is ticking for Woongjin Group to address liabilities and restore its credit.

As the group came up with majority of the acquisition fund from liabilities, the financial stability of the group's units also came under risks.

Just two months after Woongjin Group acquired Coway, the group's solar power unit Woongjin Energy filed for court receivership, after an auditor questioned the company's sustainability, citing a net loss of 112 billion won last year.

This led the group's holding firm Woongjin Company to see its credit rating downgraded to BBB- from BBB+ and increased costs for securing funds for Coway's acquisition.

Of Woongjin Group's liabilities, debts worth 200 billion won are set to expire in February, while the group is suffering difficulties to secure the amount.

"The price is set to go down when buyers have the high ground in a deal," a domestic PEF official said. "While Woongjin Group has little room to compromise on the price, buyers have no reason to rush. It seems unlikely Woongjin will be able to get back what it paid for Coway through the deal."


By Nam Hyun-woo

Woongjin Group Chairman Yoon Seok-kum
Woongjin Group is having a hard time trying to unload its flagship unit Woongjin Coway as no one wants to pay the price Woongjin set for the nation's home appliance rental firm, according to industry analysts Tuesday.

The mid-tier business group, which is desperate to secure fresh funds to resolve its worsening liquidity problems, is asking for 1.7 trillion won for its 25.08 percent stake in Coway. But potential buyers are in no rush because they expect Woongjin to lower the price tag as time drags on, they said.

In a bid to facilitate the sale, the group recently appointed an M&A specialist as a co-CEO of the company. It has named Ahn Ji-yong as its co-CEO in charge of management and marketing. Existing CEO Lee Hae-sun will lead R&D, production and operations.

Ahn was Woongjin Group's head of the planning and coordination office and played a key role when the group bought Coway for 1.8 trillion won in March. In June, the group announced it will sell its 25.08 percent stake in Coway as it fell short of liquidity.

Woongjin Coway co-CEO Ahn Ji-yong
Ahn's appointment is being interpreted as the group's intention to prevent Coway's sales process being swayed by shortlisted buyers, but industry officials say buyers have the upper hand due to the group's financial problems.

According to sources, the deal's lead manager Korea Investment & Securities has selected four companies and funds as shortlisted buyers. They are SK Networks, Haier, the Carlyle Group and Bain Capital.

Despite Coway being a lucrative company ― Korea's No. 1 home appliance rental service firm with an operating profit for the first half standing at 273.4 billion won ― only seven entities have sent the manager a letter of intent, while shortlisted firms' intent to acquire Coway is being questioned.

Both SK Networks and Haier have attempted to acquire Coway in the past, but have withdrawn from their bidding. SK Networks made its bid in 2012, when Woongjin Group sold Coway to private equity firm MBK Partners, and Heier tried in 2015 when MBK Partners first tried to sell Woongjin Coway.

"Given their previous records of not finishing their race for the Coway acquisition, it is hard to tell whether the two companies seriously want the rental firm," said an industry official who declined to be named.

For the two private equity funds (PEFs), Coway employees have already expressed their opposition. "For the past six years, MBK Partners have neglected R&D to squeeze out profit and we have already seen many firms acquired by PEFs suffering problems in job security," Coway union said in a statement.

While buyers' intention to purchase Coway is facing questions or opposition from employees, time is ticking for Woongjin Group to address liabilities and restore its credit.

As the group came up with majority of the acquisition fund from liabilities, the financial stability of the group's units also came under risks.

Just two months after Woongjin Group acquired Coway, the group's solar power unit Woongjin Energy filed for court receivership, after an auditor questioned the company's sustainability, citing a net loss of 112 billion won last year.

This led the group's holding firm Woongjin Company to see its credit rating downgraded to BBB- from BBB+ and increased costs for securing funds for Coway's acquisition.

Of Woongjin Group's liabilities, debts worth 200 billion won are set to expire in February, while the group is suffering difficulties to secure the amount.

"The price is set to go down when buyers have the high ground in a deal," a domestic PEF official said. "While Woongjin Group has little room to compromise on the price, buyers have no reason to rush. It seems unlikely Woongjin will be able to get back what it paid for Coway through the deal."


Nam Hyun-woo namhw@koreatimes.co.kr


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