Seven companies, including SK Networks, have joined the preliminary bidding to acquire Woongjin Coway Co. which is roughly valued at 2 trillion won ($1.68 billion).
Korea Investment & Securities Co., the lead manager for the sale of the water purifier rental company, received a letter of interest (LOI) from seven contenders, such as Seoul-based trading company SK Networks Co., Qingdao-based consumer electronics maker Haier Co. and U.S. private equity The Carlyle Group, according to investment banking (IB) industry sources on July 31.
SK Networks has been strengthening its rental business through SK Rent-a-Car after taking over SK Magic in 2016. The company will be able to become the leader in the rental market if it acquires Woongjin Coway, which has a 40 percent share of the domestic market.
Woongjin Coway had a total of 7.38 million rental accounts as of the second quarter, including 6.09 million in South Korea and 1.29 million in other countries. On the other hand, SK Networks has only 1.60 million rental accounts.
Haier sought to buy Woongjin Coway after forming a consortium with CJ Group in 2015 when MBK Partners, the then largest shareholder of Coway, put it up for sale. However, the deal was off when the Chinese home appliance manufacturer scrapped the plan halfway and CJ also canceled its sole bid after that.
The Carlyle Group, which has taken part in the tender as a financial investor, reportedly thinks highly of Woongjin Coway’s outstanding ability to generate cash and its leading market position.
Woongjin Group has decided to re-sell Woongjin Coway after buying it earlier this year from MBK Partners in six years. This is largely due to the problems at Woongjin Energy Co., which filed for court receivership in May. As a result, Woongjin ThinkBig Co. suffered a credit rating downgrade and raised the possibility of financial risks spreading to other affiliates.
Woongjin Group will sell its 25.08 stake in Woongjin Coway. The group first purchased a 22.17 percent stake in the company for 1.69 trillion won (US$1.42 billion) and injected an additional 200 billion won (US$167.97 million) into acquiring the remaining stake.
The lead manager of the sale will select more than four companies for the shortlist as early as this week and proceed with the main bidding after a due diligence.