Taekwang Industrial Co. is set to take control of Aekyung Industrial Co. in a nearly 500 billion won ($360 million) deal, betting the South Korean cosmetics maker can help revive the chemical and textile company’s fortunes through the booming K-beauty sector.
According to sources in the investment banking sector on Sunday, a Taekwang Industrial-led consortium, joined by T2 PE and Yuanta Investment Co., has been picked as the preferred bidder for a 63% stake in Aekyung Industrial, beating Hong Kong-based private equity firm Anchor Equity Partners and Pole Capital Korea.
Taekwang Group is said to have made the highest offer for the stake, currently owned by AK Holdings Co. and Aekyung Asset Management Co., though the price came in below Aekyung Group’s initial expectation of around 600 billion won.
Considering Aekyung Industrial’s market capitalization of 430 billion won, the deal price implies a control premium of about 200 billion won.
The two parties plan to close the deal by the end of 2025, with Samjong KPMG serving as the lead sale advisor.
With Aekyung Industrial under its wings, Taekwang is expected to accelerate its foray into the cosmetics sector, which it sees as a core growth engine beyond its struggling chemical and textile businesses.
COSMETICS AS A NEW GROWTH ENGINE
In July, Taekwang said it would invest 1.5 trillion won by 2026 – including 1 trillion won for this year – to expand into cosmetics, real estate development and energy businesses as its future growth drivers.
With more than 2.8 trillion won in liquid assets – including 1.9 trillion won in cash and equivalents and 803.8 billion won from the sale of its stake in SK Broadband Co. – the company has ample firepower for acquisitions.
The bid for Aekyung Industrial comes as Taekwang has been grappling with a prolonged slump in its mainstay chemical business.
The acquisition is expected to help Taekwang jump-start its cosmetics business, which is poised to enjoy a boom for a while thanks to the strong demand for Korean beauty products worldwide.
Reflecting its strong push into cosmetics, Taekwang moved quickly with a dedicated M&A task force, which has already prepared a comprehensive integration plan.
The company plans to leverage Aekyung Industrial’s portfolio to expand further into the consumer market, from cosmetics brands to household goods, and push for greater overseas sales.
A BROADER M&A REVIVAL
Taekwang’s pursuit of Aekyung may also mark the revival of its long-dormant dealmaking drive, said market analysts.
Taekwang, which expanded into finance and cable TV through bold acquisitions from the 1970s through the 2000s, largely halted M&A activity after 2008 amid legal troubles surrounding former Chairman Lee Ho-jin.
With those risks now easing, the group is set to resume its hunt for next M&A targets.
Its financial affiliate Heungkuk Life Insurance Co. is seeking to acquire IGIS Asset Management Co., the country’s largest real estate investment firm.
Market watchers say the new push could even pave the way for Lee’s return to management, as some shareholders have urged him to rejoin the board.
FINANCIAL RELIEF FOR AEKYUNG GROUP
With Aekyung Industrial set to leave, Aekyung Group, ranked 62nd in the country’s business hierarchy, is expected to ease its liquidity strains.
The net debt of the conglomerate’s holding firm, AK Holdings, surpassed 2.7 trillion won as of the end of the second quarter this year. Its debt-to-equity ratio stood at 372.9%.
The group’s financial troubles deepened after a deadly Jeju Air Co. plane crash in December triggered sharp declines in affiliate stocks.
It already sold Jungbu Country Club, one of its non-core assets, and idle plots near the golf course for about 220 billion won.
With the proceeds from the sale of Aekyung Industrial, the conglomerate is expected to repay some of AK Holdings’ short-term debt estimated at 507.7 billion won as of the end of June.
Following the divestiture, the group is expected to focus on its aviation and chemicals businesses.
Founded in 1954 as Aekyung Oil & Fat Industry Co., Aekyung Industrial is one of the group’s founding businesses.
Its popular household brands include Kerasys for hair care products, 2080 for oral care goods and Luna for cosmetics.
In 2024, the company posted 46.8 billion won in operating profit on sales of 679.1 billion won.
By Jong-Kwan Park
pjk@hankyung.com
Sookyung Seo edited this article.
