JEONGAN STEEL Up for Sale: Who Will Acquire Its Hyundai Motor Supply Chain and ILG Technology? [fn Market Watch]

[Financial News] JEONGAN STEEL, a steel pipe and steel sheet manufacturer undergoing corporate rehabilitation proceedings, has begun seeking a new owner. Its business relationships with finished-vehicle manufacturers such as Hyundai Motor Company and Kia, its domestically unique In-line Galvanizing (ILG) steel pipe technology, and plant real estate valued at more than KRW 80 billion are the key investment points in the deal. The company is viewed as a bolt-on M&A opportunity that could allow an acquirer to secure technology, customers and production bases at once amid the restructuring of the steel industry.
According to investment banking industry sources on the 15th, JEONGAN STEEL and sale advisor Samil PricewaterhouseCoopers will accept letters of intent (LOIs) through October 2. A preliminary due diligence process will take place from October 6 to 27, followed by a final bid on October 28.
JEONGAN STEEL is a steel pipe and steel sheet manufacturer headquartered in Dalseong County, Daegu. Its major customers include Hyundai Motor Company, Kia and HYUNDAI STEELPIPE.
Becoming an OEM supplier to major finished-vehicle and steel companies requires lengthy registration reviews and investment in dedicated equipment. As a result, an established supply chain itself is considered a barrier to entry.
The company’s technological competitiveness is also notable. JEONGAN STEEL was the first in South Korea to introduce an In-line Galvanizing (ILG) pipe-making integrated facility, securing related technology.
It also has the capacity to produce steel pipes using electric resistance welding (ERW), tip-saw cutting and an environmentally friendly water-soluble process.
Hard assets are another key variable in the M&A. The combined appraised value of the real estate at its three plants in Daegu, Pyeongtaek and Gyeongju is KRW 80.3 billion. Because the facilities are equipped for steel sheet and steel pipe production, an acquirer can use the existing production base without making a separate large-scale initial investment.
JEONGAN STEEL applied for rehabilitation proceedings in December last year after deteriorating performance caused by the downturn in the steel industry coincided with losses from investments in new businesses. The Daegu Rehabilitation Court approved the commencement of proceedings in January this year. Fund outflows to related parties and the provision of joint guarantees were also cited as factors behind the worsening liquidity situation.
According to the investigation report, the liquidation value is KRW 69.051 billion, exceeding the going-concern value of KRW 65.588 billion. This creates a structure in which business normalization through M&A is more necessary than independent survival. After reducing its financial burden through the rehabilitation process, the price at which prospective buyers can acquire its profitable operating assets is expected to determine their decisions.
An investment banking industry source explained, "The key point is that JEONGAN STEEL offers the opportunity to secure a finished-vehicle supply chain, specialized steel pipe technology and production infrastructure at the same time." The source added, "Amid restructuring in the steel industry, it could serve as a bolt-on option for a peer company or strategic investor to expand production capacity and its customer base."
[email protected] Reporter Kim Kyung-ah Reporter