This article was published on July 23, 2025, at 5:55 p.m. on the ChosunBiz MoneyMove site.
Domestic fashion corporation F&F has started preparations to exercise its preemptive right on the global golf company TaylorMade. F&F had opposed the sale of management rights using prior consent rights as leverage and tried to persuade the limited partners (LPs) to go public, but as Centroid Investment Partners (hereinafter referred to as Centroid) began the sale process in earnest, it appears that F&F deemed it urgent to prepare for exercising the preemptive right.
The market estimates that F&F will need to secure at least 1 trillion won from external financial investors (FIs). The key issue is finding an FI that meets the conditions. From F&F's perspective, they are reluctant to partner with FIs that impose mandatory conditions such as put options or drag-alongs; however, realistically, there are no FIs capable of providing 1 trillion won without such 'safety measures,' industry insiders explain.
The fact that the investment capital and liabilities that must be secured externally are too large is a burden for F&F. In the past, there was a precedent where the Woongjin Group, having relied on external funds to exercise a preemptive right and acquire Coway, succumbed to financial burdens and put it back on the market just three months later.
◇ If the sale price is 5 trillion won... F&F needs 2 trillion won in acquisition financing and 1.5 trillion won in external funds.
According to investment banking (IB) industry sources on the 23rd, F&F, the existing strategic investor (SI) in TaylorMade, signed a management contract with the global IB Goldman Sachs on the 21st for exercising its preemptive right. F&F has the right to acquire management rights under the same conditions within 14 days if a third party proposes to acquire TaylorMade. Conditions agreed upon with third parties, such as the sale price and shareholder agreements, must also be fulfilled.
Currently, the corporate value of TaylorMade mentioned in the market is around 4 trillion to 5 trillion won. If it is assumed to be sold for 5 trillion won, F&F estimates it will need to secure approximately 1 trillion won in external funds, excluding liabilities.
F&F was a major SI that invested in the fund when Centroid acquired TaylorMade for 2.1 trillion won in 2021. It invested 200 billion won in mid-ranked mezzanine and 300 billion won in lower-tier equity. They covered 500 billion won, half of the acquisition price of about 1 trillion won, excluding liabilities.
If TaylorMade is sold for 5 trillion won, F&F can first recover its investment as an existing investor to contribute to the acquisition funds. If it repays 1.4 trillion won of the acquisition financing, 3.6 trillion won will remain, with F&F's share being approximately 1.3 trillion won.
The acquisition financing limit for TaylorMade is estimated to be around 2 trillion won. Typically, the acquisition financing limit is six times the target company's earnings before interest, taxes, depreciation, and amortization (EBITDA). If F&F proceeds to acquire TaylorMade, which had an EBITDA of 310 billion won last year, it is expected to secure up to 1.86 trillion won in acquisition financing.
Therefore, assuming a valuation of 5 trillion won for TaylorMade, if F&F exercises its preemptive right to buy TaylorMade, it will need to arrange an additional acquisition fund in the mid-1 trillion won range, aside from the 1.3 trillion won receivable through exit, 1.86 trillion won in acquisition financing, and cash-like assets known to be around 300 billion to 400 billion won.
For this reason, there are observations in the market that F&F is likely to form a consortium with another FI. However, FIs typically demand certain downward protection measures, such as put options or preferred repayment rights, and it is known that F&F is maintaining the condition that 'put options cannot be accepted.'
In a situation where it has to secure about 2 trillion won in acquisition financing separately, if it provides put options to the FIs, the financial burden on F&F could become excessively large. For example, if it secures 1.5 trillion won from an FI while granting a put option with an internal rate of return (IRR) of 7%, it would need to buy it back for 2.1 trillion won after five years. This is because it actually has to guarantee a confirmed profit.
◇ If Woongjin, which procured 1.5 trillion won from external sources out of 1.7 trillion won, ultimately resells after three months.
There are concerns in the market that such excessive dependence on external funds could be risky. Looking back at previous examples where SIs in Korea relied excessively on external funds to exercise preemptive rights and acquire companies, the outcomes have generally not been favorable.
In the case of Woongjin Group, it exercised its preemptive right to reacquire Coway from MBK Partners in 2018. At that time, Woongjin Thinkbig acquired a 22.17% stake in Coway for 1.68 trillion won, with 1.5 trillion won of that being external funds raised through acquisition financing and convertible bond (CB) issuance. Woongjin Group's own funds did not even account for 10% of the acquisition amount.
As a result, the credit rating of the holding company Woongjin fell from BBB+ to BBB-, leading to a significant increase in financing costs, and the core subsidiary Woongjin Energy entered corporate rehabilitation procedures, putting the group as a whole in a financial crisis. Eventually, Coway, which had been with Woongjin for just three months, was put back on the market and sold to the gaming company Netmarble.
Park Sam-goo, former chairman of Kumho Asiana Group, exercised his preemptive right to acquire 46% of Kumho Industrial held by a creditor in 2015. The acquisition price was set at 720 billion won.
However, it was revealed that the former chairman used 330 billion won from Kumho Group affiliates for the acquisition fund, and he was eventually indicted and sentenced to prison on charges of embezzlement and breach of trust.