Korean court says Woongjin will honor MBK’s Coway deal
A South Korean court overseeing bankruptcy proceedings of Woongjin Holdings has said that the company’s biggest shareholder will honor an agreement to sell a controlling stake in subsidiary Woongjin Coway to MBK Partners. The deal was put on hold last month after Woongjin applied for court receivership.
MBK agreed in August to pay KRW1.2 trillion ($1.1 billion) for a 31% stake in water purifier manufacturer Coway. The price of KRW50,000 per share represented a 33% premium to the previous close. Of the 31% holding, 28.4% would come from Woongjin and the remainder from other shareholders. The private equity firm stepped in after a bid from KTB Private Equity fell apart.
The sale was intended to help pay down the parent company's debts. Woongjin has made heavy investments in solar energy while a slowing South Korean real estate market has hurt its construction and finance businesses. It only acquired the construction business in 2007.
After applying for receivership, Woongjin said that a shareholder meeting at which the sale to MBK would have been put to a vote would be put back to November 9.
Coway had a 55% share of the Korean water purifier market last year, and 44% of the market for air purifiers. It posted a profit of KRW161.2 billion on sales of KRW1.82 trillion. The bulk of its revenues come through monthly payments on multi-year leases by households rather than direct sales. This stable business model has much in common with MBK's cable television investments.
Should the deal go through, it would be Korea's joint-largest private equity transaction of the year.
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