이 기사는 2021년 07월 16일 08시36분 thebell에 표출된 기사입니다

Market observers are paying attention to whether IMM Private Equity (PE) will successfully acquire South Korea’s largest furniture and home furnishing company Hanssem in a buyout deal worth 1.5 trillion won ($1.31 billion).

Hanssem is in talks with IMM PE to sell a controlling stake in the country’s largest kitchen and interior furniture goods manufacturer, industry sources said Wednesday. Hanssem has given IMM PE the exclusive rights to negotiate with the seller after tapping potential buyers, mainly domestic conglomerates. The two sides plan to sign a memorandum of understanding soon.

The furniture and home furnishing company has been a potential target in the mergers and acquisitions (M&A) market for years. At the beginning, the company has approached strategic investors only, including Shinsegae, Lotte, Eugene, KCC, and CJ, but discussions didn’t make any progress. Hanssem recently started to seek financial investors, but it hasn’t gone well, either.

Hanssem has failed to strike a deal with strategic and financial investors due mainly to the price gap. Founder and honorary chairman Cho Chang-geol reportedly sought 220,000 won per share, which is the company’s stock price in early 2017 when it hit a five-year high.

An M&A industry source said there has been no potential buyer which is willing to pay double for the company whose stock price is in a low 100,000 won range. In this situation, IMM PE has partially accepted the price the seller has sought for, and received exclusive negotiation rights.

Cho and his affiliated entities will sell some 30.21% stake in the company. Cho, who owns a 15.45% stake, has distanced himself from corporate management and has since hired professional managers.

The value of a 30% stake is estimated to be around 1.5 trillion won based on the desired price of 220,000 won apiece. There is a possibility of further price adjustment, but it won’t likely be large, industry sources said.

IMM PE is expected to mainly use its fourth blind-pool fund, RoseGold IV, which closed at 2.2 trillion won, for the acquisition of Hanssem. However, considering that around 20-30% of the total fund size can be invested in one portfolio for the purpose of investment diversification, funds available for the acquisition from the RoseGold IV is likely to be approximately 400-600 billion won.

About a half of the 1.5 trillion won acquisition cost, or 750 billion won, may also be funded through debt financing. However, since Hanssem is a listed company and the stake up for sale is only 30%, the amount of debt financing is unlikely to be larger than 500 billion won, industry sources said.

Industry observers said the PE firm to use its co-investment fund to finance additional 500 billion won for the acquisition.

Hanssem’s market capitalization increased from 2.7 trillion won on Tuesday to 3.2 trillion won during trading hours on Wednesday. The company recorded revenue of two trillion won and earnings before interest, taxes, depreciation, and amortization of 157.5 billion won in 2020. (Reporting by Hee-yeon Han)