From 600 Billion to 400 Billion Won: The Real Story Behind Aekyung Industrial's Lowered Valuation

Taekwang Industrial Acquires Aekyung Industrial for High 400 Billion Won Range
Valuation Discounted Due to Poor Performance, Including First-Quarter Earnings Shock
Weakened Negotiating Power as Acquisition Candidates Drop Out

Aekyung Industrial, once considered a major target in the domestic consumer goods M&A market, has been acquired by Taekwang Industrial. The sale price, which sparked controversy over a management control premium and was initially hoped to reach the 600 billion won range during the main bidding stage, was ultimately lowered to the high 400 billion won range, drawing attention to the reasons behind this adjustment.

According to the investment banking industry on September 10, Aekyung Group has selected a consortium composed of Taekwang Industrial, T2 Private Equity, and Yuanta Investment as the preferred bidder for the acquisition of Aekyung Industrial. The stake being sold is approximately 63% of Aekyung Industrial, owned by AK Holdings, the holding company of Aekyung Group, and others. The sale price is reportedly in the high 400 billion won range.

The main bidding process was a three-way competition among the Taekwang Industrial consortium, Paul Capital Korea, and Anchor Equity Partners. Both the Taekwang Industrial consortium and Paul Capital submitted their acquisition proposals by the main bid deadline on August 22, while Anchor Equity Partners only confirmed its participation at the end of last week. There were concerns that the announcement of the preferred bidder might be delayed due to this, but since Anchor Equity Partners did not make a meaningful proposal, the selection of the preferred bidder proceeded swiftly. The official result was communicated to the buyers on September 8.

The biggest issue in this deal was the sale price. The sale of Aekyung Industrial was initiated to secure liquidity for Aekyung Group. With major affiliates such as Jeju Air, Aekyung Chemical, and AK Plaza posting poor results, AK Holdings’ debt surged, prompting the group to quickly put Aekyung Industrial-its flagship and core subsidiary-up for sale to resolve its cash crunch. The market consensus was that price would take precedence over post-acquisition management capabilities. In fact, the Taekwang Industrial consortium, which was ultimately selected, reportedly offered the highest price among the three contenders in the main bid.

The reason the sale price dropped to the high 400 billion won range was due to Aekyung Industrial’s poor performance and deteriorating business structure. Recently, a slowdown in exports to China and sluggish domestic demand have sharply curbed Aekyung Industrial’s operating profit and sales growth. Last year, consolidated sales reached 679.1 billion won, up slightly from the previous year, but operating profit fell 24.4% to 46.8 billion won. In particular, the company suffered a direct hit in the first quarter of this year, recording what has been described as an “earnings shock.” Sales were 160.4 billion won and operating profit was 12.6 billion won, down 10.3% and 45.3%, respectively, from the same period last year.

An investment banking industry source said, “During the operational and financial due diligence, the company’s value was assessed based on disclosed performance and business plans. The adjustment of business plans due to poor performance in the first half of this year appears to have acted as a discount factor in the valuation.”

Weakened acquisition competition also put pressure on the sale price. The sellers argued that Aekyung Industrial deserved a high valuation due to its brand recognition and growth potential, but the market harbored significant doubts about the excessive management control premium. The initial asking price of 600 billion won far exceeded the company’s market capitalization of 400 to 430 billion won. Another industry insider said, “Leading acquisition candidates such as Dongkook Pharmaceutical and Hoban Group dropped out of the race due to price concerns and reduced acquisition appeal, leaving the group with no choice but to adjust the price to a more realistic level.”