5 Trillion Won 'Big Deal' CJ CheilJedang Bio... Homeplus as an Obstacle [why&next]

MBK Returns to Negotiation Table
Attention on Potential Recovery of Lysine Competitiveness
Homeplus Court Receivership Emerges as a Variable... Possible Opposition from Existing Employees

MBK Partners, a domestic private equity fund (PEF) management company, has emerged as a leading bidder for CJ CheilJedang's bio business division, while the Homeplus court receivership has surfaced as a variable.

According to the investment banking (IB) industry on the 11th, the sale process of CJ CheilJedang's bio business division (Green Bio) has resumed. CJ hopes to sell the bio business division for 5 to 6 trillion KRW, making it one of the biggest deals of the year.

CJ Bio America Fort Dodge facility view. CJ CheilJedang

Until last month, this deal seemed to be fading away. MBK, along with China's Guangxin Group and Meihua Group, entered the bidding competition, but discussions were effectively halted due to a mismatch in the acquisition price expectations with CJ CheilJedang.

However, recently MBK returned to the negotiation table. This appears to be due to the bio business division's performance last year exceeding expectations. The bio business division recorded sales of 4.2095 trillion KRW and an operating profit of 337.6 billion KRW last year. The operating profit significantly increased compared to 251.3 billion KRW in 2023.

The bio business division is expected to maintain solid performance this year as well. Jinwoo Kim, a researcher at Yuanta Securities, analyzed, "With the European Union (EU) confirming the imposition of anti-dumping duties on Chinese amino acids in January, a positive ripple effect is expected," adding, "Along with improved prices of major amino acids and continuous growth of high-margin specialty products, operating profit is forecasted to reach 381.4 billion KRW this year."

This favorable performance is a card that strengthens CJ CheilJedang's position in the sale negotiations. It may also serve as a factor to narrow the gap in acquisition price disagreements that were problematic in previous negotiations.

The issue is Homeplus, which has emerged as a new variable. Negative public opinion has formed against MBK as it filed for Homeplus's corporate rehabilitation proceedings.

The bio business division sale is proceeding as a 'carve-out' transaction. This refers to separating and selling specific divisions or non-core assets of affiliated companies during major group business restructuring or reorganization. Unlike typical mergers and acquisitions (M&A), the sale target must be able to operate independently, which makes it unique.

In particular, in carve-out transactions, since the company changes hands all at once, soothing existing employees is one of the major challenges. If disputes are likely to arise, it is important to minimize the possibility of conflict through appropriate measures such as compensation payments to employees. However, due to the recent initiation of Homeplus's corporate rehabilitation proceedings, existing bio business division employees are highly likely to oppose MBK's acquisition.

An industry insider said, "When the sale of the bio business division was formalized last year, there was internal unrest over news that Chinese capital might acquire it," adding, "With the recent Homeplus court receivership, public opinion toward MBK is unfavorable, which could increase employee dissatisfaction."

Meanwhile, in November last year, CJ CheilJedang selected Morgan Stanley as the lead manager for the sale and began actively promoting the sale of the Green Bio business, which accounts for about 90% of bio sales. The bio business division mainly produces additives for animal feed and food products. It ranks first in the world in amino acids for feed such as lysine and tryptophan.