Taekwang, Anchor Equity shortlisted for Aekyung stake

Taekwang Industrial Co., a South Korean chemical and textile company, and Anchor Equity Partners, a Hong Kong-based private equity firm, have emerged as leading candidates for a controlling stake in Aekyung Industrial Co.

According to sources in the investment banking industry, Samjong KPMG, the lead advisor for the sale of the Korean consumer goods and cosmetics maker, earlier this week narrowed the list of potential bidders to four to five, with Taekwang and Anchor Equity among them.

Up for grabs is a 63% stake in Aekyung Industrial, currently owned by AK Holdings Co. and Aekyung Asset Management Co., and its parent Aekyung Group is said to be seeking to sell it for some 600 billion won ($441.4 million).

Taekwang and Anchor Equity have reportedly met the seller’s asking price, sources said, adding that both bidders are eager to acquire Aekyung Industrial to capitalize on the global Korean cosmetics boom.

Other shortlisted contenders are not known, but the rest are said to be strategic investors willing to control Aekyung Industrial’s management. Those bidders interested in minority stakes or mezzanine financing were not invited, according to sources.

COSMETICS AS A NEW GROWTH ENGINE

On Wednesday, Taekwang confirmed its bid for Aekyung Industrial during the announcement of its investment plan for a new growth roadmap.

The chemical-to-textile company said it would invest 1.5 trillion won by 2026 – including 1 trillion won for this year – to acquire or set up cosmetics, real estate development and energy businesses to foster them as one of its future growth drivers.

The decision comes as the company has been grappling with a prolonged slump in its mainstay chemical business. It is seeking to leverage the global K-beauty boom to counter the downturn in the chemical sector.   

To own Aekyung Industrial, Taekwang Group’s investment arm is said to have formed a co-general partner arrangement with Yuanta Investment as a financial investor, while the chemical affiliate is joining as a strategic investor, said sources.

Taekwang Group is the parent of Taekwang Industrial.

The chemical and textile company plans to fund its acquisition of Aekyung Industrial by issuing exchangeable bonds (EBs) backed by its holdings of 271,769 treasury shares, or 24.41%.  

It has 1.9 trillion won worth of cash and cash equivalent assets, but said it can invest less than 1 trillion won.

“We are not in the position to spend our entire available cashable assets on new businesses,” said an official from Taekwang. “Raising capital for new business investments through EB issuance is vital to ensure the company’s operation and safeguard employment.”

But its EB sale has hit a snag due to strong opposition from its second-largest shareholder, Truston Asset Management Co.

The local investment firm had filed for an injunction with the Seoul Central District Court to block the EB sale plan, arguing that issuing EBs at a price worth only one-fourth of the book value per share constitutes a breach of trust.  

The Financial Supervisory Service has also issued a correction order on Taekwang’s EB issuance plan, citing the absence of designated bond recipients as a potential risk to shareholder interests.

RENEWAL OF ANCHOR EQUITY’S INVESTMENT IN KOREA

Meanwhile, with its bid for Aekyung Industrial, Anchor Equity has resumed its investment in Korea after a hiatus.

If Aekyung Industrial is placed under the Hong Kong-based PE firm, it is expected to create synergies with Kurly Inc., Korea’s dawn delivery pioneer of fresh produce, which is one of Anchor Equity’s portfolio companies.

Kurly has recently added premium cosmetics sales to one of its mainstay businesses.

Aekyung Industrial owns popular household brands such as Kerasys for hair care products, 2080 for oral care goods and Luna for cosmetics.

In April, the Korea Economic Daily exclusively reported that Aekyung Group put Aekyung Industrial up for sale as part of broader restructuring efforts to shore up its weak financial status.

The shortlisted bidders have been given two months for due diligence before deciding whether to join the main auction in August.

Aekyung aims to name a preferred bidder and sign a sale deal in the third quarter of this year.

Write to Jong-Kwan Park, Jin-Won Kim and Man-Su Choe at pjk@hankyung.com

Sookyung Seo edited this article.