[Their Own Wealth Succession] Beksan Group 3rd Generation Kim Seongsik's Gaze Toward 'Hats'

Byeoksan Group ②
‘Byeoksan LTC Enterprise → Byeoksan → Hats’ Ownership Structure
The Only B2C Affiliate, a Highly Profitable Core Company

[Asia Economy Reporter Kwangho Lee] The real power behind the Byeoksan Group is Kim Seongsik, the eldest son of Kim Heechul, chairman of Byeoksan Group and CEO of Byeoksan (photo). Kim, who was the largest shareholder of Byeoksan, stepped back from group management in 2020 by transferring a large portion of his shares to Byeoksan LTC Enterprise. The business community analyzed this move as a possible strategic step by Chairman Kim to hand over company management rights to CEO Kim.

On March 27, 2020, Chairman Kim disposed of 6,035,840 shares of Byeoksan due to the execution of collateral rights. Among these shares, 4,301,357 were transferred to Byeoksan LTC Enterprise on the same day. Subsequently, on May 22 of the same year, the affiliate HAATZ sold 1,220,000 shares of Byeoksan on the open market. Byeoksan LTC Enterprise also acquired these shares through open market purchases.

Thus, the group's center of gravity gradually shifted toward Byeoksan LTC Enterprise. The major shareholders of Byeoksan LTC Enterprise are CEO Kim, his younger brother Kim Chansik, vice president of Byeoksan, and five members of the Byeoksan family’s 3rd and 4th generations: CEO Kim’s three children, Juri, Taein, and Taehyun. It is a 100% privately held company by the Byeoksan owner family.

Within the Byeoksan Group, there is another company as important as Byeoksan LTC Enterprise: HAATZ, the nation's leading range hood manufacturer. HAATZ is a subsidiary of Byeoksan and the only KOSDAQ-listed company within the group. HAATZ started in 1988 as a kitchen appliance manufacturer under the name Hangang Sangsa. In 2001, Hangang Sangsa changed its name to HAATZ and crossed the KOSDAQ threshold two years later. It was sold to the Byeoksan Group in 2008.

Byeoksan expected synergy effects between HAATZ’s kitchen appliance business, which supplies products installed in kitchens after apartment construction, and its existing building materials business. After initially acquiring 31.29% of the shares from HAATZ’s founder, Byeoksan further increased its stake to maintain 46.33%. The ownership structure follows the chain 'Byeoksan LTC Enterprise → Byeoksan → HAATZ.'

CEO Kim holds the position of CEO at both Byeoksan and HAATZ. He oversees the core companies among the nine companies within the Byeoksan Group. CEO Kim has focused on growing HAATZ. Although the group’s main business is centered on business-to-business (B2B) transactions such as building materials, CEO Kim is expanding the business area into business-to-consumer (B2C) through HAATZ.

Initially, CEO Kim served as co-CEO of HAATZ alongside former Byeoksan Construction Vice Chairman Yoo Sejong, but since 2009, he has been the sole CEO. It is said that CEO Kim has a special affection for HAATZ, as it records the highest sales and net income among the Byeoksan Group affiliates.

The Byeoksan Group’s business sectors are broadly divided into building materials (Byeoksan), paints (Byeoksan Paint), and kitchen appliances and ventilation (HAATZ). According to Byeoksan’s recent quarterly report, as of the third quarter of last year, Byeoksan recorded sales of 258.6 billion KRW and net income of 8.4 billion KRW. Byeoksan Paint posted sales of 34.7 billion KRW and a net loss of 2.3 billion KRW. HAATZ recorded sales of 102.7 billion KRW and net income of 3.1 billion KRW.

Considering sales and profitability, the contribution order within the group is Byeoksan, HAATZ, and then Byeoksan Paint. Other affiliates such as Daol UR and Iverty have negligible sales or are operating at a loss, making HAATZ’s presence even more prominent. The expansion of Byeoksan’s scale has been possible thanks to HAATZ’s growth. HAATZ’s performance is reflected in Byeoksan’s consolidated financial statements, creating a synergy effect.

Looking at recent performance trends, HAATZ showed steady growth with sales of 103.5 billion KRW in 2018, 112.3 billion KRW in 2019, 125 billion KRW in 2020, and 137.1 billion KRW in 2021. During the same period, EBITDA (earnings before interest, taxes, depreciation, and amortization) rose from 2.7 billion KRW to 4.7 billion KRW, 10.1 billion KRW, and 12.3 billion KRW, respectively. Both scale and profitability have strengthened.

Attention is also focused on HAATZ’s investment activities. According to HAATZ’s quarterly report, HAATZ made investments in September 2021 in 'Primer Sazze Project Fund No.1 (250 million KRW),' in October 2021 in 'Primer Sazze Fund II (1.068 billion KRW),' and in April 2022 in 'Impact Square Social Enterprise Didimdol No.2 (125 million KRW).' These are funds established by venture capital (VC) and accelerators (AC). This is interpreted as seeking new avenues through indirect investment. It will be interesting to see how CEO Kim utilizes HAATZ going forward.