MBK shelves plan to exit Korea's Coway

The decision preceded an announcement by a government-appointed committee that a batch of Coway's purifiers were found to have defects that tainted water with nickel, posing a potential health risk. Over the past two months, two groups of consumers have filed suits against the company claiming a combined KRW4.4 billion ($3.9 million) in damages.

Coway's stock reached a high of KRW113,000 in early June but it has since fallen more than 20%. Following a disclosure by the company on September 9 that a strategic review of the business had been halted - and MBK would remain an investor - the stock has rallied, reaching KRW88,500 by midday trading on September 12, up 3.27% for the day.

Founded in 1989, Coway is the dominant player in Korea's health appliance industry, generating most of its revenue from rental and maintenance services for water filtration and air purifier devices. MBK acquired its 31% stake in the company from bankrupt Woongjin Holdings in January 2013 for KRW1.2 trillion.

South Korean conglomerate CJ Corporation last October revealed that it was involved in preliminary bidding for a controlling interest in the asset but two months later said it would not submit a final offer. Previous reports suggested MBK's stake could sell for upwards of KRW2 trillion. Based on the current market price, the stake is worth KRW2.13 trillion.

Traces of nickel were discovered in water from three ice maker and water purifier models manufactured and sold by Coway between April 2014 and December 2015, according to Yonhap News Agency. An estimated 87,000 users were involved. The government committee concluded that the nickel coating of the ice-making system was damaged during assembly, resulting in powdered metal mixing with water.

The committee said it would order the recall of all faulty products. Coway has already promised to take responsibility for any health problems that emerge and claims to have collected around 96% of the products involved.

Coway posted revenue of KRW2.16 trillion for the 2015 financial year, up from KRW2.01 trillion for the previous 12 months. Net income increased from KRW242.9 billion to KRW349.4 billion over the same period. In 2012, prior to MBK's investment, revenue and net income reached KRW1.81 trillion and KRW119.7 billion, respectively.

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• Topics
• North Asia
• Trade sale
• Consumer
• South Korea
• MBK Partners
• Exit
• manufacturing