IMM Private Equity, the third-largest private equity firm in Seoul, with $5.4 billion assets under management, is in talks to become the largest shareholder of South Korea’s largest kitchen and interior furniture goods manufacturer Hanssem, a filing showed Wednesday.
The proposed strategic investor and the seller group has signed a memorandum of understanding regarding the transaction. Hanssem did not disclose the proposed acquisition price.
This gives IMM PE the exclusive rights to negotiate with the seller -- Hanssem’s 82-year-old founder Cho Chang-gul and his seven affiliated entities including Hanssem Design Beyond East & West Research Foundation.
The founder and the foundation owns nearly a 20 percent stake in the company. Other affiliated persons remain undisclosed.
Following IMM PE’s due diligence, the company will sign a binding contract with IMM PE, possibly within the second half.
“Hanssem Honorary Chairman Cho has been in search of a strategic investor that recognizes the value of the company and its future growth potential,” Hanssem said in a statement.
“We signed an MOU with IMM PE out of a belief that it could become a partner that is committed to Hanssem’s long-term growth and solid foundation for management.”
The filing comes in response to a request for inquired disclosure by the Korea Exchange earlier in the morning, as the Ansan-based company was reported to be negotiating with IMM PE in a private deal.
Following the news, Hanssem shares rose 24.7 percent to close at 146,000 won ($126.90) apiece Wednesday on the KRX’s main board Kospi.
Market watchers expect the sales price to be at least 180,000 won apiece, which is way above the market price. But given Hanssem’s treasury stocks that amount to 36.4 percent of the total shares issued, the proposed acquisition price might not be high.
“In general, a new shareholder has the right to make (strategic) decisions with regards to the acquired company’s treasury stocks, so it is reasonable to see that the treasury stocks were taken into account altogether when valuing the target,” Lee Min-jae, an analyst at NH Investment & Securities, wrote in a note Wednesday.
If the deal reaches a close, the company founded in 1970 will witness a change in the top shareholder for the first time in its history.
Market analysts also point that Cho has ruled out family succession for the company.
Cho’s eldest son died in 2012, and none of his three daughters are engaged in the management of the company, as they own 1.32 percent, 0.88 percent and 0.72 percent stake in Hanssem, respectively.
Cho, who owns a 15.45 percent stake, has also distanced himself from corporate management and has since hired professional managers.
Moreover, the COVID-19 pandemic has accelerated the demand for home furnishing service as more people stayed at home, making the company look more attractive to the proposed buyer.
Hanssem logged 93 billion won in operating profit for 2020, up 66.7 percent from the previous year.
“The selloff attempt does not stem from the company’s operational or financial trouble, but instead is attributable to a lack of successor among the owner family,” said Ra Jin-sung, an analyst at KTB Investment & Securities.
Hanssem has maintained the No. 1 position in the domestic kitchen furniture market since 1986 and in the interior furniture market since 2001. The company is known to have introduced the concept of a stand-up kitchen for the first time for Korean households.
Minority shareholders in Hanssem include US-based Teton Capital Partners and the National Pension Service, according to disclosures.
By Son Ji-hyoung (firstname.lastname@example.org