A Result of Aggressive M&As
CJ CheilJedang is trying to increase its liquidity by selling real estate assets and this shows the sense of crisis of CJ Group as a whole. CJ CheilJedang has conducted mergers and acquisitions aggressively for years in order to realize an economy of scale, but its debt ratio has risen before any synergy.
The company has spent approximately two trillion won on the M&As. For example, it invested 1.5 trillion won to buy U.S. frozen food manufacturer Schwan’s and 210 billion won to acquire Selecta in Brazil. The idea was to improve its distribution networks in the United States and strengthen its business in the biotech, food and feed industries, but the activities have led to no sales growth.
CJ CheilJedang’s current debt ratio is close to 200 percent and its short-term borrowings amounted to 3.5 trillion won at the end of the third quarter of this year. The financial costs, such as interests, the company paid for the first three quarters of this year amount to 540 billion won. Besides, its Q3 operating profit fell 26.5 percent from a year earlier and it is now said that its credit rating may be adjusted downward. The company is expected to be able to prepare 1.3 trillion won or so by selling real estate assets.
In the meantime, CJ CheilJedang chairman Lee Jay-hyun is going to give his 1.84 million preferred stocks to his two children. The stocks will be converted into common stocks in 2029. CJ Group explained that the children’s shareholding will not be affected in view of the period, the market value of the stocks is 120 billion won, and 60 percent of it will be paid in taxes.