Joyworks&Co to Terminate Business Transfer Agreement, Says No Loss on Initial Payment

KOSDAQ-listed company Joyworks&Co has dismissed concerns recently raised regarding the termination of its import contract with the American running brand HOKA. The company stated that, since the offline business transfer agreement with the importer was structured so that the remaining contract payment would only be made upon achieving certain performance milestones, there will be no additional outflow of funds beyond the initial contract payment.

On January 12, Joyworks&Co announced that it is reviewing the termination procedures for the business transfer agreement it signed with the unlisted company Joyworks.

This follows the recent decision by Deckers, the U.S. parent company of HOKA, to abruptly terminate its contract with the importer Joyworks, which in turn means the business transfer agreement for HOKA’s offline retail segment, signed last year between Joyworks&Co and Joyworks, will also be terminated.

In September last year, Joyworks&Co entered into the business transfer agreement with Joyworks to expand its business areas. Through this deal, Joyworks&Co was to acquire all offline retail operations for HOKA held by the importer Joyworks.

Of particular note is that the total 25 billion won business transfer contract was structured as an “earn-out” agreement, meaning that the seller would receive additional profit if revenue or net income exceeded certain thresholds.

Upon signing the contract, Joyworks&Co paid an initial 12.5 billion won. The second payment, also 12.5 billion won, was to be paid in installments from September this year through the end of September 2027 in accordance with the earn-out structure, upon which the business transfer would be finalized. Therefore, if the business transfer is terminated, the additional 12.5 billion won does not need to be paid.

A Joyworks&Co representative explained, “Of the initial 12.5 billion won paid, we have already secured approximately 11 billion won worth of goods (shoes, apparel, accessories, etc.) at cost, so there will be no further outflow of funds for additional inventory purchases.” The representative added, “Even after the termination of the distribution contract, we retain enough inventory and sales rights to continue normal sales for at least three months, so we expect to recover cash through inventory sales without additional cash outflow.”

Joyworks&Co maintains that, as the profitability of its core furniture business continues to improve, it can maintain a stable financial structure despite the restructuring of its new business ventures.

The aforementioned representative stated, “The furniture business, which has been operated under an independent governance structure, implemented fixed cost reduction and product competitiveness strategies after 2024, and we expect profitability to improve significantly starting this year.” The representative continued, “Stable cash flow generated from the furniture business will serve as the key foundation for the company’s overall financial structure.”

The company also dismissed concerns about short-term liquidity. Some had speculated that there might be early redemption requests for the 12 billion won worth of convertible bonds (CB) issued last August to investors such as SangSangin Securities for facility investment and other purposes.

A company official stated, “Although there have been concerns about early redemption of the CB, we have already confirmed through ongoing discussions with major creditors that there are no plans for early redemption, so the likelihood is low.” The official added, “These CB creditors have sufficient protection measures, such as first-priority collateral through real estate trusts, so factors that could put pressure on short-term liquidity are extremely limited.”

Finally, the company said, “We apologize to our shareholders for any confusion caused by issues outside our main business,” and added, “Rather than relying on a specific business or short-term issues, we will seek balanced growth from a mid- to long-term business portfolio perspective.”