Hansae Yes24 moves closer to acquiring GM supplier Erae AMS

Hansae Yes24 Holdings Co., the holding company of South Korea’s leading apparel original equipment manufacturer (OEM) Hansae Co., has moved a step closer to adding an auto parts business to its portfolio upon emerging as the preferred bidder for Erae AMS Co.

According to sources in the Korean investment banking industry on Tuesday, Hansae Yes24 Holdings was named the preferred bidder for Erae AMS in a four-way race with its 142 billion won ($107 million) offer for the latter’s controlling stake of 80.6%.

It beat Hyolim Industrial Co., Shinhwa Precision & Engineering Co. and Nara GI Inc.

Haesae Yes24 Holdings joined the takeover bid to diversify its business portfolio currently heavily reliant on its apparel OEM and original development manufacturing (ODM) businesses.

CASH COW

Erae AMS supplies GM Korea Co., General Motors Co.’s Korean operation, with auto parts, mainly drive systems, infotainment and autonomous driving solutions.

In April, it also became a Tier 1 supplier for Kia Corp. after signing an 18.5 billion won contract to supply military vehicle components for five years.

Erae AMS posted 10.9 billion won in operating profit in 2023, nearly double that of 2022 on sales of 576.6 billion won, up 7.3% on-year.

Its parent Erae cs Co. put the lucrative auto parts unit up for sale in April as part of its efforts to restructure its business grappling with debts of 163 billion won.

Erae AMS was formerly Korea Delphi Automotive Systems Corp. and Erae cs took over Delphi’s Korean operation after acquiring its 42.3% stake for 190 billion won in 2011 and an additional 50% stake for 100 billion won in 2015.

After the takeover, Erae cs split it into Erae AMS and Estra Automotive System Co., the 30% stake of which is also up for grabs as part of its parent’s reorganization plan.

Erae cs hoped to fetch about 100 billion won in total for the stakes in Erae AMS and Estra Automotive.

GARMENT TO AUTO PARTS

Hansae Yes24 Holdings hopes the auto parts-making company can offer a buffer during a slowdown in its mainstay garment business.

The company, also the parent of clothing retailer Hansae MK Co. and online bookstore Yes24 Co., reported its first drop in earnings in 2023 since its transition into a holding company.

With its hefty reliance on the clothing business, it is vulnerable to economic volatility, so the company has been seeking a new growth engine in a different sector for diversification.

Late last year, the company announced a plan to actively seek mergers and acquisitions, including investment in logistics and content-related businesses in the US, to offset the downturn in the garment industry. 

Hansae Yes24, a rookie in the auto parts industry, expects the vast global network it has built around its apparel business for decades will help its fast penetration into the global auto parts business with Erae AMS.

It has about 30 casualwear companies across the world with clients including The Gap, H&M and Zara, and is currently expanding its sales network and manufacturing bases beyond China and Russia to include South America and New Zealand on top of Southeast Asia.

Hansae Yes24 Holdings shares traded down 0.4% at 4,630 won in the morning on Wednesday, while Hansae shares were up 0.2% at 16,960 won. 

Write to Jong-Kwan Park at pjk@hankyung.com

Sookyung Seo edited this article.