[비즈한국] Taekwang Group is recently making a visible presence in the mergers and acquisitions (M&A) market. While many companies are scaling back investments due to the recent economic downturn, Taekwang Group is actually accelerating its investment activities. This is quite a departure from the 2010s, when it was criticized for being stingy with investments despite being a large conglomerate.
According to the investment banking (IB) industry, Aekyung Group recently selected the Taekwang Industrial consortium as the preferred bidder for the sale of Aekyung Industrial 018250. Taekwang Industrial is pursuing the acquisition in a consortium with its affiliates, T2 Private Equity and Yuanta Investment.
Variables remain. Taekwang Industrial announced last June that it would issue exchangeable bonds worth 318.6 billion won. Exchangeable bonds are bonds that grant the holder the right to exchange them for shares of another company held by the issuer. The exchangeable bonds Taekwang Industrial intended to issue are to be exchanged for 24.41% of its own treasury shares. It appears Taekwang Industrial plans to use the cash secured from these bonds to fund the acquisition of Aekyung Industrial.
However, the second-largest shareholder, Truston Asset Management, opposed the issuance and filed for an injunction with the court. Truston Asset Management stated, "The decision to issue exchangeable bonds based on all of the company's treasury shares not only harms shareholder value but also runs directly counter to the new government's policy of protecting the rights of minority shareholders; therefore, we will take legal action, including an injunction lawsuit."
Taekwang Industrial plans to decide whether to proceed with the issuance based on the court's ruling. Of course, the acquisition of Aekyung Industrial is not impossible even without the issuance of the bonds. While the IB industry estimates the acquisition price of Aekyung Industrial at around 600 billion to 700 billion won, Taekwang Industrial's total equity stood at 4 trillion won as of the end of June. However, considering the recent slump in the petrochemical industry, spending hundreds of billions of won could be a burden.
A Taekwang Group official stated, "We expect the request for an injunction to stop the issuance of the exchangeable bonds to be dismissed," adding, "We do not believe the court's decision will be a significant variable in the acquisition of Aekyung Industrial."
Taekwang Group is also pursuing the acquisition of IGIS Asset Management. According to the IB industry, Taekwang Group affiliate Heungkuk Life Insurance recently submitted a letter of intent to acquire IGIS Asset Management. Morgan Stanley and Goldman Sachs, the lead managers for the sale of IGIS Asset Management, have selected Heungkuk Life Insurance and Hanwha Life Insurance 088350 for the shortlist. Rumors are circulating in the financial sector that Hanwha Life Insurance has offered a higher price than Heungkuk Life Insurance.
IGIS Asset Management is a real estate-specialized asset management firm that owns famous buildings such as Centerfield and Factorial Seongsu. The company's value, as assessed by the IB industry, is in the range of 800 billion to 1 trillion won. Consequently, the sale price is expected to be around 500 billion won. In addition to this, Taekwang Group recently acquired the media outlet Smart Today.
In the 2010s, Taekwang Group was criticized for being stingy with investments. Beyond M&As, even facility investments were rare. It was only in the 2020s that Taekwang Group began to actively engage in investments. A representative example is TL Chemical, a joint venture established by Taekwang Industrial and LG Chem 051910 in 2021. TL Chemical produces acrylonitrile (AN), with Taekwang Industrial holding a 60% stake and LG Chem holding 40%. AN is a monomer made from propylene and ammonia and is used as a raw material for acrylic fiber, ABS synthetic resin, and nitrile butadiene latex (NBL).
TL Chemical had planned to build an AN production facility with an annual capacity of 260,000 tons in the Mipo Industrial Complex in Ulsan by 2025, but construction has yet to begin. This is due to the downturn in the petrochemical industry. Impacted by the slump, Taekwang Industrial's recent performance has also been poor. Sales fell 12.34% from 1.109 trillion won in the first half of last year to 972.1 billion won in the first half of this year, and while it recorded an operating profit of about 600 million won in the first half of last year, it posted an operating loss of 16.2 billion won in the first half of this year. According to Taekwang Industrial, the investment plan for the TL Chemical plant is currently being discussed with the intention of a full-scale review.
The situation is equally bleak for Aekyung Industrial and IGIS Asset Management, which Taekwang Industrial is seeking to acquire. Aekyung Industrial's performance is on a downward trend, and IGIS Asset Management is viewed as having poor prospects due to the real estate market downturn.
However, if Taekwang Group acquires these two companies, it can expect the effect of expanding its business portfolio. Aekyung Industrial's main products are cosmetics and household goods, a field Taekwang Group has not focused on previously. Taekwang Group established Heungkuk REIT Management in March of this year to enter the real estate investment business. Although its presence is not yet significant as it is in the early stages, acquiring IGIS Asset Management could lead to synergy. Some in the business world interpret Taekwang Group's moves as an attempt to pivot away from a company centered on petrochemicals and insurance and pursue organizational restructuring.
Another point drawing attention in the business world is the potential return of former Taekwang Group Chairman Lee Ho-jin. Former Chairman Lee stepped down from front-line management while under investigation for embezzlement and breach of trust in 2012, but became eligible to return to management after receiving a special pardon on Liberation Day in August 2023. However, the current situation facing Taekwang Group is unfavorable. If former Chairman Lee returns, he will immediately face the task of recovering Taekwang Industrial's performance. Given the recession in the petrochemical industry, a quick recovery is not easy. For this reason, some in the business world expect former Chairman Lee's return to take place only after Taekwang Group's organizational improvement through M&As. Former Chairman Lee Ho-jin currently serves as an advisor to Taekwang Industrial.
The aforementioned Taekwang Group official explained, "The pursuit of the acquisitions of Aekyung Industrial and IGIS Asset Management is part of the business structural reorganization through entry into new businesses and can be seen as business diversification at the Taekwang Group level," adding, "However, I understand the acquisition of Smart Today was done to strengthen content for our media affiliate, T-Cast." The official added, "A date for former Chairman Lee Ho-jin's return to management has not yet been decided."