Chungho Nais, which makes household electronics such as water purifiers, has been put up for sale. The move is aimed at raising several hundred billion won to pay the controlling shareholder's inheritance tax. The market estimates the company's value at about 800 billion won.
According to the investment banking (IB) industry on the 26th, the controlling shareholder family of Chungho Nais has been in contact with potential buyers since the first half of last year to sell management control. It is said to be in talks with global private equity fund (PEF) manager Carlyle.
An IB industry official said, "The Chungho Nais owner family cannot keep the company because of the inheritance tax burden," and added, "They had already been reviewing and pushing for a sale even before Chairman Jeong Hwi-dong's death."
Chairman Jeong had maintained his status as the largest shareholder since founding Chungho Nais in 1993, but died in June last year at age 67. Until his death, he held 75.1% equity in Chungho Nais. The second-largest shareholder is Micro Filter, a family company of Chairman Jeong (12.99% equity), and Vice Chairman Jeong Hwi-cheol, Jeong's younger brother, held 8.18%.
Although Jeong's eldest son from his former marriage, Jeong Sung-hoon, is asserting his share of the inheritance, the 75.1% equity held by Chairman Jeong is understood to have been inherited by his wife, Chair Lee Kyung-eun, and his son, Jeong Sang-hoon. By law, the statutory inheritance ratio is spouse 1.5 to child 1.
The equity inherited by Chair Lee and Jeong Sang-hoon is estimated to have incurred more than 200 billion won in inheritance tax. Under the Inheritance Tax and Gift Tax Act, the value of Jeong's equity is assessed at about 360 billion won, and a 20% control premium is added under the largest-shareholder share surtax rule. Applying the top inheritance tax rate of 50% and excluding various deductions, the final calculated tax bill comes to about 220 billion won.
According to the industry, the controlling shareholder family of Chungho Nais is said to expect a corporate value of more than 800 billion won. Given that 2024 earnings before interest, taxes, depreciation and amortization (EBITDA) were about 88 billion won, they are effectively seeking about nine times EBITDA. A valuation of 800 billion won is also the price proposed when U.S. water treatment company Culligan pursued an acquisition of Chungho Nais in 2022.
However, there is skepticism over whether Chungho Nais can be sold for 800 billion won even with a control premium, as Coway, the No. 1 company in the same industry, is currently trading at only 4.2 times its 2024 EBITDA (1.22 trillion won).