Woongjin Group, a midsized South Korean conglomerate, will take back the country’s biggest small home appliance maker, Coway, after selling it off in 2013, the group announced Monday.
In its regulatory filing, Woongjin said a consortium comprising Woongjin Thinkbig Co. and STIC Investment Inc. will purchase a 22.17 percent stake in Coway Holding for 1.68 trillion won ($1.48 billion) in a bid to diversify the group’s business portfolio.
“I believe the rental business has great growth potential,” Chairman Yoon Seok-keum said during a press conference. “These days, we are leasing even automobiles. Water purifiers and air purifiers are necessary items for home, (so) rental services for such pricey items will be mainstream. Coway will be our great drive for growth for the future.”
The acquisition price per share is 103,000 won, double what it was when Woongjin sold Coway to private equity MBK Partners in January 2013.
The PE acquired a 30.9 percent stake in Coway and management rights from Woongjin for 1.2 trillion won due to the group’s financial difficulties. Those stemmed from Woongjin subsidiary Kukdong E&C’s bankruptcy, as well as acquisitions of the savings bank and photovoltaic units.
Woongjin Chairman Yoon Seok-keum speaks during a press conference in central Seoul on Monday. (Yonhap)
Under Yoon, Woongjin has branched out to diverse business areas ranging from cosmetics and leisure activities to IT solutions, educational content development, ingot and wafer manufacturing, and renting out small home appliances.
The chairman is known as the pioneer of the rental market for small home appliances, including water purifiers.
Yoon founded Coway in 1989 and introduced the country’s first rental services for water purifiers, air purifiers, bidets, massaging chairs and mattresses.
He came up with the idea of renting out water purifiers in the late 1990s, when sales of such products dropped dramatically in the wake of the Asian financial crisis as a number of Korean businesses went bankrupt.
Instead of selling pricey water purifiers, Yoon introduced the rental service along with a servicing and repairs program called Coway Lady.
Under Yoon, Woongjin Coway was No. 1 in the rental business market for 25 years. Its revenue from renting out water purifiers was 10 times what competitors generated from sales. Woongjin Group rose to No. 31 on the list of Korean conglomerates in terms of assets in 2011.
The chairman, who has a personal affection for the rental business, began his efforts to bring Coway back early this year.
In January, Yoon created a new rental business unit dubbed “Woongjin Rental” and began preparing for the buyback of Coway, despite skeptical views about Woongjin’s financial capabilities in the market.
“At the time, we didn’t want to lose Coway, but had to sell it off to repay the debts to our creditors,” Yoon said. “We have overcome the court receivership and repaid all the debts, and I promise I will make it successful.”
The chairman promised an annual growth rate of 10 percent for the rental business of Woongin and Coway together.
With the acquisition of Coway, Woongjin’s total assets will grow from 2.5 trillion won to 4.5 trillion won, according to the market. The total size of its door-to-door sales workforce is estimated at around 33,000 people.
“Woongjin will become the (dominant) business, with an advanced door-to-door selling workforce and infrastructure,” said a group representative.
The group plans to seek synergy between Coway and its current rental business in terms of economies of scale, which will improve efficiency while reducing logistics and marketing costs, according to the group.
After completing the acquisition process by the first quarter of next year, Woongjin will again start using the household brand name “Woongjin Coway” and launch new services to expand into the rental market.
By Song Su-hyun (email@example.com)