MBK Earns 1 Tril. Won on Investment in Coway
Woongjin Group has decided to buy back Coway, a water purifier manufacturer which it sold five years and seven months ago.
Woongjin Thinkbig, the group's key affiliate engaged in book publishing, announced on Oct. 29 that it would acquire 16.358 million shares (22.17 percent) of Coway Co. for 1.684 trillion won (US$1.475 billion).
The Woongjin-Stick Investment consortium signed a stock purchase agreement (SPA) with MBK Partners. The acquisition price per share was 103,000 won, twice the price of 50,000 won at the time of sale in 2013.
MBK acquired 30 percent of Coway`s shares and management rights for 1.1 trillion won in January 2013. It will earn a total of 1 trillion won in investment return through two block deals, capital realignment, dividends and the stake sale to Woongjin. In addition, it will receive dividends this year.
Coway (formerly Woongjin Coway) is a household appliance company founded by Woongjin chairman Yoon Seok-geum in 1989. Yoon became a legend through his rise from a salesman of Encyclopedia Britannica to an owner of a prosperous business group.
Yoon directly managed the company as CEO during the Asian financial crisis. He created a new business market by launching a water purifier rental service. The company overcame the crisis and expanded its market to air purifiers, videts, massage chairs, and mattresses. It had remained the number one company in its business sector for 25 years after establishment. However, the group had to sell off the company to the private equity fund MBK in January 2013 to tide over the global financial crisis.
With Woongjin Group taking over Coway again, the group’s total assets will rise from 2.5 trillion won to 4.5 trillion won.
Woongjin Group said, "We have established ourselves as a unique door-to-door sales company by building a visiting sales infrastructure of 33,000 people, including Woongjin Thinkbig’s sales force of 13,000 people and Woongjin Rental’s 20,000 people."
By acquiring Coway, Woongjin plans to create synergies such as cross-selling and alliance services between its affiliates and realize economies of scale. It hopes to reduce the costs related to logistics and operation of call centers and achieve joint marketing.
Woongjin plans to actively promote its highly recognized Woongjin Coway brand after the first quarter of next year when the acquisition is completed, and will also push for various strategies to expand the market.
"The rental market is growing at a rate of 10 percent a year, and demand will increase with changes in macroeconomic conditions such as increasing single-person households, population aging and changing consumption patterns," said a representative for Woongjin.
Half of the acquisition funds will be shared by the Woongjin Group and Stick Investment consortium, with the remaining half to come from financial investors.
"Woongjin will once again pool its energy to develop the rental market and offer consumers good products," said an official from Woongjin Group.