Can Woongjin Acquire Lucrative Coway?
While the Woongjin Group has decided to acquire Coway Co. for 1.68 trillion won (US$1.51 billion), industry analysts are questioning its financing ability.
Last month, the group signed a stock purchase agreement with MBK Partners to acquire 22.17% of Coway shares for 1.68 trillion won (US$1.51 billion).
Coway is a lucrative company that manufactures, sells, and rents home appliances, including bidets, air purifiers and water softeners, under the Coway brand in Korea and internationally.
Under the agreement with MBK Partners, Woongjin is required to complete payment by March 15, 2019.
Of the total acquisition cost, the group plans to raise 380 billion won (US$342 million) for itself and the remainder from financial investors. STIC Investment will provide 500 billion won (US$450 million) while Korea Investment & Securities will raise the remaining 800 billion won (US$720 million).
According to industry watchers, the Woongjin Group is planning to come up with a specific financing plan for the 380 billion won (US$342 million) it needs to raise.
The group has secured 95 billion won (US$85.5 million), including Woongjin Thinkbig’s cashable assets worth 75.6 billion won (US$68.0 million) and a bridge loan from Samsung Securities. It plans to raise 170 billion won (US$153 million) through Woongjin Thinkbig’s capital increase and the remaining 115 billion won by issuing commercial papers (CPs) or obtaining an additional bridge loan.
Group officials say the planned capital increase and raising of the 115 billion won can be completed without any difficulty. They say the total amount of the bridge loans that the group's creditors have promised to provide reaches 200 billion won (US$180 million).
Yet some market watchers are pessimistic about the group’s financing capabilities. “Time is running out for Woongjin and there is still a difference in valuation opinions with regard to its financing plan based on Woongjin Play City,” one of them mentioned, adding, “STIC Investment’s plan to set up a project fund to finance Woong's deal is not going to be easy in view of its large size.”