Logistics Merger
South Korea’s processed food and fisheries conglomerate Dongwon Group is looking to acquire the country’s third largest logistics company, Dongbu Express, to enhance the company’s existing logistics business line led by Dongwon Industries Co. and create synergy effects with its fishing, food and packing material businesses.
On Sept.20, Dongwon Enterprise Co., a holding company of the Dongwon Group, signed a memorandum of understanding (MOU) with KTB Private Equity and Q Capital Partners, the largest shareholders of Dongbu Express, to secure exclusive negotiation rights for the acquisition of a 100 percent stake of Dongbu Express. The acquisition is estimated to cost Dongwon about 470 billion won (US$421 million). However, the terms of the deal are subject to change during the following negotiations.
The acquisition would enhance the logistics arm of the Dongwon Group which has a traditional specialty in fisheries, food and packing business. The group’s logistics unit under Dongwon Industries has been mainly focusing on small-scale distribution. Dongbu Express operates logistics services on land and sea as well as passenger transportation and car rental businesses. Dongbu Express recorded 44.4 billion won (US$39.7 million) in operating profit and 719.5 billion won (US$708.7 million) in sales last year.
According to an official of the Dongwon Group, the group has been interested in the acquisition of Dongbu Express since it was put up for sale last year. However, its first attempt at acquiring the company fell through due to a steep sale price. This was the second attempt.
“The company expects that the acquisition of Dongbu Express would create synergy effects with existing fishing, food and packing material businesses,” said an official of the Group.
An official of the Dongwon Group said that the Group expects the M&A will be completed by the end of the year. In the meantime, Dongwon and the consortium led by KTB Private Equity and Q Capital Partners will carry out due diligence and discussion over details for a deal including the sale price.