Global private equity fund (PEF) manager Carlyle will acquire comprehensive home appliance company Chungho Nais and its affiliates. The purchase price is about 1 trillion won. Carlyle had continued negotiations to acquire all equity, including the stake held by the late founder Jeong Hwi-dong's former spouse.
According to the investment bank (IB) industry on the 4th, Carlyle recently signed a stock purchase agreement (SPA) to acquire all equity in Chungho Nais and Micro Filter, MCM, and Nice Engineering 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 Chungho Nais' management control on the market late last year. After the former chair died suddenly in Jun., funding for an inheritance tax exceeding 200 billion won became necessary.
According to the IB industry, several domestic and foreign private equity funds, including Blackstone and EQT Partners, reviewed the acquisition but reportedly withdrew midway because terms such as price did not match. An industry official said, "Among them, Carlyle offered a price that matched the owner family's expectations, and the deal was concluded because Chair Lee happened to want to sell the company to a well-known global PE."
The biggest variable in this deal was the fate of the 75.1% equity in Chungho Nais that the late chair 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's younger brother, Vice Chair Jeong Hwi-cheol, held 8.18%.
However, a variable arose when the eldest son, Jeong Sung-hoon, born to the former spouse of the late chair, challenged the effectiveness of his father's will and filed a lawsuit to confirm the will's invalidity and to divide the inherited property. If Jeong is recognized only for the minimum legal right of a reserved portion, he would secure 10.7% equity in Chungho Nais, equivalent to about one-seventh of his father's equity, but if, through litigation, he is recognized for the full statutory share, he could inherit up to 21.5%, about two-sevenths of the late chair's equity.
The issue is that Carlyle initially hoped to acquire 100% equity in Chungho Nais. Because Chungho Nais is unlisted, unlike listed companies, public pressure on the controlling shareholder and checks on control—such as sending public letters from minority shareholders or soliciting proxy votes—are difficult, but if Jeong actively seeks to exercise rights under the Commercial Act, thorny issues could arise. Under the Commercial Act, shareholders with more than 3% equity are eligible to exercise minority shareholder rights, such as requesting to inspect and copy accounting books. Also, if Carlyle later resells Chungho Nais or seeks an initial public offering (IPO), the very structure of not having secured 100% equity could give acquirers or investors grounds to demand a price discount.
As Carlyle ultimately secured Chungho Nais' management control on a stable basis, the company plans to expand domestic market share while accelerating its push into overseas markets.