CJ Group emerges as a surprise dark horse in the race to acquire JoongAng Ilbo, forms alliance with Daou Kiwoom [fnMarketWatch]

[Financial News] A late-stage twist has emerged in the race to acquire JoongAng Ilbo. CJ Group, which sat out preliminary bidding, has joined forces with Daou Kiwoom Group and will take part in the final bid on the 19th. With CJ, already JoongAng Ilbo’s third-largest shareholder, returning as a prospective buyer, the competitive landscape is also expected to change. However, this is not a simple media-company acquisition but a creditor-led restructuring deal, so the outcome is expected to hinge on how much capital is injected after the acquisition.
According to investment banking (IB) industry sources on the 16th, CJ Group plans to form a consortium with Daou Kiwoom Group and participate in the final bid for JoongAng Ilbo. Daou Kiwoom Group had earlier submitted a letter of intent (LOI) through its affiliate Daou Technology and was selected as a qualified bidder.
CJ Group is currently JoongAng Ilbo’s third-largest shareholder, holding a 9.24% stake through CJ OliveNetworks. It did not participate in the preliminary bidding but opted to team up with an existing bidder ahead of the final round. The move is also thought to have been influenced by creditors’ decision to bar companies that did not participate in the preliminary bidding from making a solo bid in the final round.
The two sides’ interests are also seen as aligned. Daou Kiwoom Group must take into account the Newspaper Act’s 50% cap on large companies’ ownership of general daily newspapers. CJ Group, meanwhile, can spread the financial burden of an acquisition while expanding its points of connection with its existing media businesses.
The key issue going forward is how much capital will be injected after the acquisition. The sale of JoongAng Ilbo is being pursued through a paid-in capital increase via a third-party allotment, rather than a sale of existing shares. Unlike a conventional change-of-control deal, in which the purchase price goes to existing shareholders, this structure brings new funds into the company to repay debt and improve its financial position.
As of the end of June this year, JoongAng Ilbo had about 350 billion won in short- and long-term borrowings and corporate bonds. Its financial burden after an acquisition would also be substantial when guarantees for affiliates’ debts are taken into account. For creditors, the actual funds bidders can raise and the amount of debt they can repay immediately are just as important as the bidders’ reputations or business synergies.
The possibility of combining CJ Group’s content business with Daou Kiwoom Group’s financial and digital content businesses has also drawn attention. However, business synergies do not automatically translate into a stronger bid. The two sides’ equity contribution ratios, arrangements for exercising control, and plans for additional funding need to be spelled out before their competitiveness can be assessed in practice.
Meanwhile, six parties are currently on the list of qualified bidders: Daou Technology, Orion, Global Sae-A, OK Financial Group, Geumbo Development, and eBroadcasting. The selection of a preferred negotiating partner is expected to depend on the acquisition terms and financing plans submitted in the final bid on the 19th.
A source in the investment banking industry said, “CJ’s participation is expected to change the competitive landscape in the race to acquire JoongAng Ilbo.” The source added, “Daou Kiwoom Group has been seen as having the disadvantage of lacking a PR office within the group and being closed off to the media, so a consortium with CJ Group is also expected to help offset that.” The source continued, “The final outcome will depend not only on business synergies but also on the financial capacity to bear the burden after the acquisition and the repayment terms presented to creditors.”
A source in the investment banking industry said, “CJ’s participation is expected to change the competitive landscape in the race to acquire JoongAng Ilbo. The final outcome will depend not only on business synergies but also on the financial capacity to bear the burden after the acquisition and the repayment terms presented to creditors.”


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