Global private equity fund (PEF) manager Carlyle will acquire home appliance maker Chungho Nais and its affiliates. The purchase price is about 1 trillion won. The sale includes the equity held by the late founder Jeong Hwi-dong's ex-wife and her children.
According to the investment banking (IB) industry on the 4th, Carlyle recently signed a stock purchase agreement (SPA) to acquire all equity in Chungho Nais, Micro Filter, and MCM held by the Chungho Nais owner family.
Earlier, Chair Lee Kyung-eun, the spouse of the late chair Jeong, and their son Jeong Sang-hoon put management control of Chungho Nais on the market in Jan. this year. After the late chair Jeong suddenly passed away in Jun. last year, they needed funds to pay more than 200 billion won in inheritance taxes. According to the IB industry, several domestic and foreign private equity funds, including Blackstone and EQT Partners, were also said to be interested in the acquisition.
The biggest variable in this deal was the fate of the 75.1% equity in Chungho Nais that the late chair Jeong had held while alive. That equity was inherited by Chair Lee Kyung-eun and their son Jeong Sang-hoon, while the family company Micro Filter held 12.99% and the late chair Jeong's younger brother, Vice Chair Jeong Hwi-cheol, held 8.18%.
However, a variable emerged when the eldest son, Jeong Sung-hoon, born to the late chair Jeong's ex-wife, challenged the validity of his father's will and filed lawsuits to confirm the will's invalidity and to partition the inherited estate. If Jeong is recognized only for the minimum legal right to a reserved share, he would secure 10.7% equity in Chungho Nais, equivalent to about one-seventh of his father's equity. But if the court recognizes the full statutory inheritance through the lawsuits, he could inherit up to 21.5%, or about two-sevenths of the late chair's equity.
From Carlyle's standpoint, cleanly acquiring even Jeong Sung-hoon's equity in full was preferable. Because Chungho Nais is unlisted, unlike a listed company, it is difficult to exert public pressure on the controlling shareholder or check management through measures such as sending public letters from minority shareholders or soliciting proxy voting. Still, if Jeong were to actively exercise rights under the Commercial Act, it could cause headaches. Under the Commercial Act, a shareholder with 3% or more equity is eligible to exercise minority shareholder rights such as requesting inspection and copying of accounting books. In addition, if Carlyle later sells Chungho Nais again or pursues an initial public offering (IPO), a structure that does not secure 100% equity could give acquirers or investors grounds to demand a price discount.
With Carlyle ultimately securing stable management control of Chungho Nais, the company plans to expand its domestic market share while accelerating its push into overseas markets.