This article was published on Feb. 20, 2025, at 5:03 p.m. on ChosunBiz's MoneyMove site.
Woongjin, a group that faced a crisis of dissolution due to frequent megadeals, is making a big deal attempt again after six years. Woongjin, which is pursuing the acquisition of the top burial company Friedlife, expressed its ambition to raise acquisition funds of 1 trillion won solely through corporate bonds and acquisition financing, without a capital increase.
Market reactions are understandably skeptical. Both corporate bonds and acquisition financing are liabilities. There are discussions about whether it is possible for Woongjin to raise such a large amount of funds given its credit rating. Although it struggled to acquire Coway six years ago, it also remembers having to resell it just three months later.
According to investment banking (IB) industry sources on the 20th, Woongjin is pursuing the acquisition of 100% of Friedlife's equity. This combines the equity held by the seller, private equity fund manager VIG Partners, with the equity that may be included when exercising the tag-along rights. The market estimates the total acquisition price to be around 900 billion to 1 trillion won.
Woongjin is confident about quickly finalizing the deal. It is currently conducting due diligence on Friedlife and expects to complete the transaction by May. However, the industry anticipates that the timing for the signing of a binding stock purchase agreement (SPA) will be around the second half of this year.
This is because there are concerns in the market about Woongjin's ability to raise funds. Since the late 1980s, Woongjin has expanded through mergers and acquisitions but faced a financial crisis due to indiscriminate growth. After acquiring companies such as Seoul Savings Bank, Geumdong Construction, and Woongjin Polysilicon, it experienced the aftereffects of a series of savings bank crises and a cooling real estate market, forcing it to sell Coway, its main subsidiary, in 2012.
Although Woongjin has heavily invested in mergers and acquisitions, its determination to regain Coway was strong. Woongjin attempted to reacquire Coway in 2019. However, immediately after the acquisition, concerns about liquidity emerged, and it was sold again just three months later. If Netmarble had not stepped in as the acquirer, the aftereffects would likely have been significant. Korean Investment & Securities, which was a financial investor at that time, also breathed a sigh of relief.
Woongjin holds the position that 'this time will be different,' yet the market's response remains cold. As of the end of the third quarter last year, Woongjin's consolidated current assets amounted to 423.3 billion won, with cash and cash equivalents at just 47.4 billion won. This indicates that raising acquisition funds in the 1 trillion won range independently is a difficult situation. Seemingly aware of shareholder concerns regarding capital increases, Woongjin emphasized, "We are not considering raising acquisition funds through a capital increase, but plan to secure funds through the issuance of corporate bonds and loans from financial institutions."
The issuance of corporate bonds is a card Woongjin did not play during its previous acquisition of Coway. Woongjin has no record of raising funds in the corporate bond market over the past decade. At that time in 2019, its credit rating was BBB- (negative), and while its financial situation may have improved since then, how much it can raise remains unclear.
In 2012, Woongjin applied for court protection alongside its holding company, Woongjin Holdings, and Woongjin Construction (Geumdong Construction), with rapid debt adjustment as the goal, which put corporate bond investors in a difficult position and caused controversy.
Ultimately, it appears that Woongjin will have to rely heavily on borrowing to fund the majority of its financing, similar to the previous Coway situation. According to industry sources, private equity fund manager Eugene Private Equity has been informed to participate as a financial investor (FI).
An IB industry official noted, "The burial business may seem unfamiliar to foreigners, limiting potential investors to domestic ones. Moreover, the amount of funds Woongjin needs to raise is disproportionately large compared to its size. Ultimately, Woongjin must provide confidence in its ability to enhance corporate value, but given its past history, it is uncertain whether it will succeed."
A Woongjin representative explained, "We have prepared plans within the limits of what we can handle based on our credit ratings and reputation, and we are currently in positive discussions with multiple institutions, so we assess that the risk is not as great as the market's concerns. Moreover, we expect that the synergies arising from the acquisition will significantly contribute to stabilizing the business portfolio and securing future growth drivers."