"Must Sell to Survive, But No Place to Buy".. Distribution Sale 'Big 3', Facing Difficulties

[Financial News] Due to the prolonged domestic recession and uncertain industry outlook, large-scale sale projects in the distribution industry are facing difficulties. Homeplus, which is undergoing corporate rehabilitation procedures (court management), is proceeding with high-intensity restructuring such as store closures, but the lack of a suitable buyer is making mergers and acquisitions (M&A) uncertain before the rehabilitation plan is approved. 11st is stuck in the sale process for over a year due to the e-commerce restructuring centered on Coupang, and Aekyung Industry, which was put up for sale due to group management difficulties, is experiencing friction over the sale price.
According to the distribution industry on the 24th, Homeplus has been continuing self-rescue measures by closing an additional 15 stores after entering corporate rehabilitation procedures last March due to failed rent negotiations. Currently, it is pursuing M&A before the rehabilitation plan is approved, but no buyer has appeared, and even a conditional investment contract has not been signed. Samil Accounting Corporation, the sale manager, is recruiting investors, but no one has clearly expressed an intention to acquire. A Homeplus representative said, "M&A before approval is the only way to rehabilitate, but if no buyer appears, the possibility of bankruptcy cannot be ruled out."
11st has been continuing the sale process for over a year but is adrift without a hopeful acquirer. In particular, 11st is proceeding with the sale process led by financial investors (FI) as its parent company SK Square did not exercise the call option (right to repurchase shares). Oasis and Qoo10 were mentioned as potential buyers but failed, and recently, there are few places showing purchase intentions. Regarding the recent voluntary retirement, 11st explained it as "a measure to strengthen profitability," but the industry predominantly interprets it as "downsizing" in anticipation of acquisition negotiations. The investment industry points out that "the overall valuation of e-commerce companies has decreased since TMON's low-price sale," which is also an obstacle.
Relatively, the sale of Aekyung Industry is in a better situation. Although Aekyung Industry is the flagship business of Aekyung Group, it was put up for sale last April due to the high debt ratio and liquidity crisis of the holding company AK Holdings. Despite the difficulties in M&A in the distribution industry, Aekyung Industry is called a 'big fish' due to its stable profit structure covering household goods and cosmetics and its complete value chain. The most determined is Taekwang Industry. Taekwang Industry, which participated in the main bid on the 22nd, is pushing for acquisition in a consortium form by forming a fund with external investors through its group affiliate private equity fund (PEF) T2 Private Equity and Yuanta Investment. Taekwang, which urgently needs new growth engines amid the long-term recession in the petrochemical and textile industries, plans to invest 1.5 trillion won by next year to enter the cosmetics, energy, and real estate development fields, and is evaluated to have both acquisition intention and investment capacity. However, the gap between Aekyung Industry's desired sale price (about 600 billion won) and the current market capitalization (400 billion won range) is analyzed as an obstacle.
An industry official said, "The distribution industry is facing a dark outlook due to the domestic recession and excessive competition, and even large distribution companies are focused on restructuring, limiting acquisition capacity," adding, "Although there are many items for sale, successful transactions are rare, which is the reality of the current distribution M&A market."


clean@fnnews.com Lee Jeong-hwa Reporter