The acquisition of Aekyung Industrial has been narrowed down to a three-way competition among Taekwang Group, T2 Private Equity, Anchor Equity Partners, and Paul Capital Korea. While a flexible production structure and stability in the institutional sector of daily necessities are considered attractive factors, high dependence on China and limitations in brand competitiveness are identified as risks. Aekyung Industrial proposed a sale price that is about double its market capitalization, and evaluations of this have been mixed in the market.
On the 25th, according to the distribution and investment banking industries, Samjong KPMG, the sale's lead manager, has selected three candidates among those who submitted letters of intent (LOIs) for the acquisition: the Taekwang Group consortium (Taekwang Industrial and T2 PE), Anchor Equity Partners, and Paul Capital Korea, and is currently conducting due diligence. The main bidding is expected to take place at the end of August, with the preferred negotiators to be announced in September.
The background for Aekyung Group's move to sell is the rapid deterioration of financial soundness at AK Holdings, the holding company. AK Holdings' liability ratio rose from 228.8% in 2020 to 328.7% in 2023, and in the first quarter of this year, it soared to 359.4%. The cumulative impact of poor performance from key subsidiaries such as Jeju Air and AK Plaza, along with the repercussions of an aviation accident at Muan International Airport, has intensified the liquidity crisis, ultimately making Aekyung Industrial, which is relatively easy to liquidate, a target for sale.
Aekyung Group has estimated the value of its 63.38% stake in Aekyung Industrial at about 600 billion won. This is more than double the estimated value of around 278 billion won when considering Aekyung Industrial's market capitalization based on the closing price on the stock market on the 24th (about 438.9 billion won). The price reflects the management rights premium and opinions in the market are divided.
Aekyung Industrial is a mid-sized consumer goods corporation with cosmetics and daily necessities as its two major pillars. Except for one factory located in Cheongyang, Chungcheongnam-do, most of its production relies on ODM (Original Design Manufacturing). Unlike established large brands such as LG H&H and Amorepacific Corporation with strong manufacturing bases, being able to quickly respond to market changes based on a flexible production structure is viewed positively by acquisition candidates.
Aekyung Industrial's "light structure" is similar to the success patterns of K-beauty indie brands that have recently grown by leveraging social media-based marketing and rapid product turnover. Compared to vertically integrated large corporations, the risks are lower, and there's wider room for brand rebuilding and redefining marketing strategies, according to market opinion. In particular, Aekyung Industrial is accelerating global customized product development through strengthened collaboration with ODM companies, broadening the scope for acquirers to pivot the business as desired.
The fact that the institutional sector of daily necessities accounts for over 60% of total revenue is also considered a safety net. Brands such as "2080," "Trio," and "Kerasys" are well-known in the domestic market and generate stable sales with relatively low-risk low-involvement consumer goods.
On the other hand, there are clear limitations in the cosmetics sector. About 70% of sales are concentrated in the Chinese market, meaning that performance is significantly affected by the recovery of Chinese consumption. Efforts to reduce dependence on China continue, but so far, there have been no meaningful results. The global brand recognition of major brands such as "Luna" and "Age 2 Wholeness" is also considered weaker compared to competitors. In fact, operating profit in the first quarter of this year decreased by 63.3% compared to the same period last year, clearly showing a deterioration in profitability.
Industry analysts suggest that the entities acquiring Aekyung Industrial must consider beyond just securing management rights; they should also evaluate brand restructuring, redefining global strategies, and the potential for future mergers and acquisitions (M&A) of new brands. This is because the recent K-beauty market is trending toward a repositioning centered around indie brands and a virtuous cycle structure based on social media and platform distribution.
A beauty industry representative stated, "Aekyung Industrial is generating stable revenue based on its institutional sector of daily necessities, and its organization is light and agile enough to respond flexibly to market changes. This means it can sufficiently replicate the success formula of indie brands," adding, "How the new owner rebuilds the brand's capabilities will be a turning point for the company's value in the future."