Taekwang Group has begun due diligence on its key production facility, the Cheongyang Plant, to acquire Aekyung Industrial. This is interpreted as a multifaceted strategy to expand its business area into consumer goods, stepping away from its petrochemical and textile-centered business portfolio, while also preparing a foundation for succession.
According to investment bank (IB) and retail industry sources on the 28th, Taekwang recently visited the Cheongyang Plant, a major production base of Aekyung Industrial in South Chungcheong Province, confirming that it checked the equipment, production capacity, and workforce. This comes as a step to seriously probe the possibility of acquisition following the initial bidding. It has been assessed as the leading move among the shortlisted qualified acquisition candidates.
Taekwang announced on the 2nd that it plans to invest about 1.5 trillion won to acquire and establish corporations related to cosmetics, energy, and real estate development. In a situation where restructuring of its business due to deteriorating conditions in the petrochemical and textile sectors and securing new growth engines is urgent, Aekyung Industrial, with a relatively light brand portfolio, has emerged as a strategic investment target. It is also evaluated that synergy with existing household goods and cosmetics subsidiaries is possible.
Aekyung Industrial is a medium-sized consumer goods corporation, centered on household goods and cosmetics. The household goods sector accounts for more than 60% of total sales and holds several domestically recognized brands such as '2080', 'Trio', and 'Kerasys'. It has been evaluated to have a stable revenue base, and the Cheongyang Plant, which is the subject of this due diligence, is a key asset responsible for about half of the total production.
However, the cosmetics sector is highly dependent on the Chinese market, where about 70% of sales are concentrated, meaning its performance is significantly influenced by the recovery of the Chinese economy. Additionally, the global competitiveness of major brands like 'Luna' and 'Age 20's' is considered lower compared to larger brands such as LG H&H and Amorepacific Corporation.
Aekyung Group has placed Aekyung Industrial on the sale list to overcome the group's liquidity crisis. It is known to have offered a price of about 600 billion won for a 63.38% stake, which is more than twice the current market capitalization, even considering a management premium. There are mixed evaluations in the market regarding whether the sale price is excessive or justified. Aekyung Group plans to initiate business restructuring centered around Jeju Air after selling Aekyung Industrial.
The candidates for this acquisition bid include the Taekwang Group-T2 Private Equity (T2 PE) consortium, as well as Anchor Equity Partners (Anchor PE) and Paul Capital Korea, totaling three parties. Anchor PE is considering an acquisition as part of a strategy to enhance the export competitiveness of the derma-cosmetic brand 'Dermafirm', while Paul Capital Korea is classified as a long-term investor.
Industry observers have also raised early speculation that Taekwang has effectively been selected as the preferred negotiation partner. In contrast to its competitors, Anchor PE and Paul Capital Korea, which are classified as financial investors (FI), Taekwang is seen as a strategic investor (SI) with an advantage in terms of long-term business relevance and mid- to long-term operational planning.
The acquisition structure also includes T2 PE, a private equity fund management firm under Taekwang Group. T2 PE has a high equity stake held by the Taekwang owner family. Mr. Lee Hyun-jun and Ms. Lee Hyun-na, the eldest son and daughter of former chairman Lee Ho-jin, each hold a 9% stake. The parent company, Taekwang Industrial, and Tesis hold a 41% equity stake each, and Mr. Lee Hyun-jun holds 11.3% of Tesis's equity. For this reason, this acquisition is being interpreted as a strategy considering Taekwang's succession structure.
However, Taekwang Industrial announced on the 27th of last month that it would issue exchange bonds (EB) worth about 318.6 billion won to secure funding for the acquisition of Aekyung Industrial. However, the second-largest shareholder, Truston Asset Management, has filed for a provisional injunction, claiming violations of corporate law, raising uncertainties about the funding structure. In response, Taekwang stated, 'The EB issuance is for the purpose of securing operating funds for new growth engines and is unrelated to the governance structure.'
The sale of Aekyung Industrial has not been finalized. The sale's lead adviser, Samjong KPMG, and Aekyung Group plan to conduct the initial bidding by comprehensively considering the due diligence results of the candidates and the opinions of the creditors, with the preferred negotiation partner expected to be announced as early as September. The industry expects that adjustments to the sale price and the brand restructuring strategy will be key variables in determining the final acquirer.