After Many Twists and Turns, Hanssem Embraced by IMM PE... SPA Signing 'Final Chapter'

SPA Signing Announcement Scheduled for the 25th... Securities Firms Expect Acquisition Synergy

[Asia Economy Reporter Lee Seon-ae] Korea's No.1 furniture company Hanssem has finally come under the wing of the private equity fund (PEF) management firm IMM Private Equity. This comes just three months after both parties signed a memorandum of understanding (MOU) for the acquisition. Despite difficulties such as differing positions during due diligence that required adjustments, and a provisional injunction filed by the second-largest shareholder, the U.S.-based hedge fund Teton Capital Partners, which holds an 8.43% stake in Hanssem, to block the due diligence, the parties overcame these obstacles and finalized the stock purchase agreement (SPA).

According to the investment banking (IB) industry on the 25th, IMM PE completed the SPA for acquiring Hanssem and plans to disclose it after the market closes. IMM PE originally planned to sign the SPA by the end of September, but the process was delayed by over a month, creating a stalemate atmosphere. An IB industry insider said, "I understand the SPA signing has been completed," adding, "Even if any variables arise, the deal closing will happen within this week."

IMM PE and Hanssem Chairman Cho Chang-geol decided on an acquisition price of 235,000 KRW per share, including a control premium, through prior discussions, and simultaneously set a price adjustment range of 7.5% in the contract. This means IMM PE could reduce the price to about 217,000 KRW per share, approximately 7.5% lower than the original price. However, after due diligence, the two sides struggled to narrow their differences over the acquisition price, causing some friction.

Hanssem took a firm stance on not lowering the acquisition price as much as possible, while IMM PE insisted on reducing the price to secure funding as planned, citing the recent unfavorable trend in Hanssem’s stock price. IMM PE had no choice but to use loans for the acquisition, but the continuous decline in Hanssem’s stock price reduced the acquisition financing limit.

Ultimately, both parties agreed on a price around 1.44 trillion to 1.45 trillion KRW, which is about 3-4% (50 billion to 60 billion KRW) lower than the initially expected acquisition price of 1.5 trillion KRW. The contract structure allows a maximum discount of 7.5%, but the parties successfully narrowed the discount rate to about 3-4%.

The transaction target is based on an effective stake of 37.8%. This includes the 15.45% stake held by Hanssem’s largest shareholder, Chairman Cho Chang-geol, and shares held by seven related parties. IMM PE’s blind fund, Rose Gold No.4, will invest about 400 billion KRW, strategic investor (SI) Lotte Shopping will contribute about 300 billion KRW, and the remaining funds will be raised through acquisition financing (up to 800 billion KRW).

The securities industry generally holds a positive outlook on the synergies expected from IMM PE’s acquisition. Kim Se-ryeon, a researcher at Ebest Investment & Securities, said, "With IMM PE’s acquisition completed, various growth stories (such as incorporating online interior companies, overseas expansion, and business diversification) are likely to act as stock price momentum going forward." Kim Ki-ryong, a researcher at Yuanta Securities, also commented, "As uncertainties such as the provisional injunction by the second-largest shareholder and concerns over third-quarter earnings have entered their final stages, it is a good time to expect positive factors like Hanssem’s core business competitiveness, strengthened shareholder return policies following the change in the largest shareholder, and synergies through store sharing with Lotte."

Ra Jin-seong, a researcher at KTB Investment & Securities, predicted, "Post-acquisition, shareholder value enhancement and capital efficiency improvements through treasury stock utilization will lead to mid- to long-term corporate value growth." Baek Jae-seung, a researcher at Samsung Securities, forecasted, "After the change in the major shareholder to a PEF, once capital policies, business strategies, and synergy creation strategies with Lotte Group as an SI are confirmed, we will be able to have clearer confidence in mid- to long-term performance."