[M&A Insights] Daewoo Winia Selling Affiliates: Remaining Risks and Challenges

Daeyu Winia Group's Aggressive M&A
Winia, Daeyu Plus, etc. Undergoing Sale Procedures
Risks Remain Including Wage Arrears and Investigations

The kimchi refrigerator is a uniquely essential home appliance in South Korea. Many households keep both a regular refrigerator and a kimchi refrigerator to store kimchi?an indispensable part of the dining table?more fresh and deliciously. In particular, Winia, led by the ‘Dimchae’ brand, has held the number one position in the kimchi refrigerator market, surpassing Samsung Electronics and LG Electronics.

However, Winia is planning to be put up for sale in the merger and acquisition (M&A) market. The Daeyu Winia Group is attempting to sell off real estate assets including Daeyu Plus and golf courses due to a management crisis. We looked into how a group that once aggressively expanded its business aiming to enter the ‘top 50 domestic companies’ fell into crisis, and what remaining tasks exist for management normalization.

Started in 1999 with Auto Parts Business... Expanded into Home Appliances and Leisure

The history of Daeyu Winia Group began with Daeyu A-Tech, established in 1999. It grew its size based on manufacturing automotive parts, supplying car seats to Hyundai Motor and Kia Motors. Then, it acquired Changup Sangho Savings Bank (now Smart Savings Bank) in 2010 and Montvert Country Club golf course in 2011. In 2014, it made a full-fledged entry into the home appliance business by acquiring a 70% stake in Winia Mando (now Winia) for about 70 billion KRW. In 2018, it also acquired Dongbu Daewoo Electronics (now Winia Electronics).

However, a management crisis hit centered on Winia Electronics. Due to the impact of COVID-19 and the global economic downturn, domestic and overseas factories stopped operating from 2021. Subsequently, the crisis spread to other affiliates due to worsening management and large-scale wage arrears. The group restructured its governance last year. Most automotive parts-related affiliates were placed as subsidiaries of Daeyu A-Tech. The group aimed to overcome the crisis by streamlining businesses such as home appliances and improving operational efficiency.

Other affiliates underwent corporate rehabilitation procedures (court receivership). Winia Electronics, Winia Electronics Manufacturing, Winia, Daeyu Plus, and Winia Aid applied for rehabilitation. The group also proceeded with sales. In November last year, the group sold Montvert Country Club to Donghwa Group for about 300 billion KRW, and sold 4.87 million shares (37.66%) of Daeyu AP, which manufactures automotive parts such as steering wheels, to DH Global for 36.9 billion KRW.

Facing Criticism for "Overambitious Business Diversification"... Risks Mounting

The news of the group divesting affiliates was positively received by the stock market. On the 29th of last month, Daeyu Plus, which announced it would pursue M&A sales before the approval of the rehabilitation plan, hit the daily upper limit at the start of trading the next day. The closing price on the 30th was 214 KRW, up 49 KRW (29.70%) from the previous trading day. On the same day, Daeyu A-Tech’s stock closed at 1,126 KRW, up 96 KRW (9.32%) amid expectations for group normalization. Daeyu Plus selected Samil Accounting Corporation as the lead manager for the sale and decided to select a conditional buyer through a limited competitive bidding process. Winia also announced a public competitive bidding and entered the sales process for M&A.

Accordingly, criticism that the management’s overambitious business diversification triggered the group-wide crisis has become unavoidable. The group has been criticized for failing to achieve results in ventures such as the laundry business in 2017 and the robot business in 2022. The highlight was the 2021 Namyang Dairy acquisition battle. While Hahn & Company (Hahn & Co.) was in dispute with the Namyang Dairy chairman Hong Won-sik’s family over the acquisition, Daeyu Holdings signed a memorandum of understanding with the Hong family to purchase Namyang Dairy shares. However, on the 4th, the Supreme Court confirmed Hahn & Co.’s victory, making it difficult for Daeyu Winia Group to recover the 32 billion KRW deposit paid to the Hong family.

Wage arrears and the resulting investigations are also issues to be resolved. On the 19th of last month, the Gwangju District Prosecutors’ Office Public Investigation Division conducted raids at the finance department office of Winia Electronics Manufacturing and the group’s headquarters. Gwangju city and industry sources estimate unpaid wages exceed 70 billion KRW. Local partner companies that have not received payment for supplies are also facing bankruptcy risks. The Suwon District Prosecutors’ Office Seongnam Branch is investigating wage arrears and perjury charges. Park Young-woo, chairman of Daeyu Winia Group, stated at last year’s National Assembly audit that he intended to solve the wage arrears problem by selling the golf course, but even after the golf course sale was completed, unpaid wages were not paid to employees, causing further issues. Ultimately, the responsible attitude of Chairman Park and the owner family appears to be the key to resolving the remaining problems.