[Exclusive] Hankook McNulty Enters M&A Market... Considering Sale of 53.5% Major Shareholder Stake

Sent M&A Proposals to Asset Managers and PEFs... Major Shareholder Initiates Sale

[Asia Economy Reporter Lee Seon-ae] Hankook McNulty is expected to appear as a listing in the merger and acquisition (M&A) market. It has been confirmed that they have started gauging the market's reaction through a 'preliminary intention' survey to consider the sale of the major shareholder's stake.

According to the investment banking (IB) industry on the 30th, Hankook McNulty recently sent a 'Hankook McNulty M&A Proposal' to asset management companies and private equity funds (PEFs) for the sale of the major shareholder's stake. It is a three-page document containing a simple M&A proposal, not an investment memorandum (IM).

An IB industry official said, "It does not take the form of an official document but seems to have been sent to asset managers or PEFs to check if there are buyers in the market for preliminary intention assessment," adding, "It should be seen as the start of preparing to appear as a listing in the M&A market."

According to the proposal, the sale target desired by Hankook McNulty is a total of 53.49% (5.901 million shares), including 29.01% (3.2 million shares) held by the largest shareholder Lee Eun-jung and 24.48% (2.701 million shares) held by the second-largest shareholder Go Han-jun. Hankook McNulty hopes to sell at 10,167 KRW per share. Converted, the simple sale (transaction) scale reaches the 60 billion KRW range.

Even if Hankook McNulty officially enters the M&A market, industry observers believe the possibility of many buyers is low due to unfavorable market conditions. Considering the current contraction of the M&A market, the sale price desired by Hankook McNulty may be burdensome. Hankook McNulty has 11,031,483 listed shares with a face value of 500 KRW. As of the 29th, the market capitalization is 75 billion KRW. The conclusion is that acquisition candidates must give high marks to Hankook McNulty's growth potential and that various companies must show interest for a deal to be possible.

A PEF official said, "Looking at recent M&A market trends, even prime companies with growth potential would have found it much easier to pursue investments if they had come to market before the global tightening fully began."

Hankook McNulty operates the entire coffee-related business, from green coffee beans to roasted coffee and processed products. Since coffee is produced only in tropical and subtropical climate regions, Korea has a very high dependence on coffee imports. As Hankook McNulty imports major raw materials, its performance is influenced by global supply-demand imbalances and cost increases. According to consolidated financial statements, Hankook McNulty's sales in the first half of this year were 34.7 billion KRW, a 55.8% increase compared to the same period last year. Sales set a record high for the first half of the year. However, operating profit decreased by 29.2% to 700 million KRW, and net loss was recorded at 1 billion KRW.

Hankook McNulty explained, "Due to changes in the economic environment caused by international affairs, the cost of raw and subsidiary materials rose sharply, increasing the cost of sales ratio and decreasing operating profit," adding, "The net loss is unrelated to operating performance as it reflects valuation gains from convertible bonds (CBs)."