"Buying good items at a low price should be viewed as a rational management decision."
"I hope they will approach management with a long-term perspective."
Kim Dong-sun, executive vice president in charge of future vision at Hanwha Hotels & Resorts, is reported to be considering the acquisition of the premium resort "Bukhansan Paraspara Seoul," and as of the 5th, the market evaluation is divided on this matter.
Positive voices are emerging in the investment banking (IB) sector. This is seen as a good merger and acquisition for enhancing core business competitiveness. Paraspara Seoul is the only five-star resort at the foot of Bukhansan National Park.
Acquiring this resort has significance as it would allow Hanwha Hotels & Resorts to expand its territory as a premium resort. As of the first quarter of this year, Hanwha Hotels & Resorts operates 12 business sites in the country, most of which are mid-range resorts. If Paraspara is acquired this time, they will possess both a five-star hotel (The Plaza) and a resort in Seoul. This means it will aid in strengthening core business competitiveness.
The fact that it can be purchased at a good price is also highlighted as an advantage. Some believe that the amount required to acquire Paraspara is estimated to be around 200 billion won, suggesting that financing may not be easy, but there are many analyses indicating that less money will actually be needed.
The transaction is expected to proceed on the premise that Paraspara will inherit the project financing (PF) it has, and it should be noted that, given the background of Hanwha Group, it may be possible to reduce interest rates through credit enhancement.
There is room for price adjustment. This is because Samjeong Corporation, which owns the Paraspara resort, has been facing management difficulties and has put the property on the market. From Samjeong Corporation's perspective, Paraspara is a highly valued business site that they have worked hard on. The reason it is being put on the market just four years after opening in 2021 is due to a slowdown in the construction market. Recently, it has been reported that Samjeong Corporation's unrecovered debts are around 250 billion won. Additionally, an incident occurred at their construction site for the Banyan Tree in Haeundae, Busan, last February, which is also a negative factor.
An IB industry insider said, "This should be viewed as a distressed sale. It's an excellent opportunity to acquire good assets at a low price," and noted, "There have also been many criticisms that the core business competitiveness has weakened surrounding Executive Vice President Kim Dong-sun, so this would be a good deal to resolve such controversies."
On the other hand, there are voices opposing the acquisition due to concerns over financial burdens. After recently acquiring the meal service company OURHOME, it is argued that pursuing another merger and acquisition would be risky. Specifically, in a situation where they are considering acquiring the meal service division of Shinsegae Food to enhance OURHOME's value, they need to clearly set their priorities.
Hanwha Hotels & Resorts has increased its debt ratio after acquiring 58% of OURHOME's equity for 869.5 billion won. By the end of 2023, the debt ratio was about 175.2%, but it rose to about 197% in the first quarter of this year.
There are also points expressing that the internal dynamics of the Hanwha Group should be taken into account now that the third generation of the chaebol is prominently involved in management. This includes criticism of the opinion from some within Hanwha that "if they buy a good facility like Paraspara Seoul cheaply but the situation becomes unfavorable, it could be profitable to attach revenue and put it back on the market." This is also a warning not to overlook the controversy surrounding Executive Vice President Kim Dong-sun, who led the acquisition of the domestic rights to the premium hamburger chain "Five Guys" only to push for a sale two years later.
An industry insider noted, "From the IB industry perspective, this may be a management decision that generates revenue, but the owner's actions need to be more prudent to exhibit strong leadership," adding that, "Jumping in when there's profit and withdrawing flexibly can be a minus factor in terms of corporate management, which means 'you need to win people's hearts to succeed.'"