All six make it through final bidding for JoongAng Ilbo...a green light in the search for a new owner [fn Market Watch]

[Financial News]  All six firms on the shortlist for the acquisition of JoongAng Ilbo have submitted final bids, making the competition appear more intense than expected. In particular, Daou Kiwoom Group, which has joined forces with CJ Group, has emerged as a leading contender, prompting speculation that the acquisition price could exceed the 500 billion won cited in the industry.
According to investment banking (IB) industry sources on the 19th, all six firms—Daou Technology, Orion, Global Sae-A, OK Financial Group, E Broadcasting and Geumbo Development—submitted bid proposals for the final round for JoongAng Ilbo, which closed at 3 p.m. that day. After completing due diligence by prospective buyers last week, all of them also took part in the final bidding, accelerating the sale process. The sale adviser is Samil PricewaterhouseCoopers.
The key feature of this transaction is a third-party allotment of new shares, rather than a sale of existing shares. The funds invested by the buyer will flow directly to JoongAng Ilbo, not to its existing major shareholder. In effect, the company’s financial structure will be improved through an infusion of new capital while management control is transferred.
IB industry sources had initially cited a figure of around 500 billion won, but as competition among prospective buyers intensifies, expectations are growing that bids could exceed that amount. However, even if a buyer offers a high acquisition price, its ability to actually pay the capital-increase funds is expected to determine the final outcome.
The leading contenders currently being discussed are a consortium of Daou Kiwoom Group and CJ Group. CJ Group is JoongAng Ilbo’s existing third-largest shareholder, holding a 9.24% stake through its affiliate CJ OliveNetworks. Although it did not participate directly in the preliminary bidding, its alliance with Daou Kiwoom Group has made it a key factor in the acquisition contest.
The fact that both sides belong to business groups subject to restrictions on cross-shareholding, and are therefore subject under the Newspaper Act to limits on stakes in general daily newspapers, is also cited as a reason for forming a consortium. The market is watching for the possibility of a joint acquisition structure in which the stakes are divided between the parties. However, the specific stake ratios and governance structure have not been finalized.
The burden of repaying corporate bonds is behind JoongAng Ilbo’s urgency to sell. JoongAng Ilbo, which entered a creditor-led workout last July, faces corporate bond maturities totaling 147.4 billion won from next month through the end of next year. Bonds worth 129.4 billion won alone mature next year.
For the sellers, securing an investor who can promptly pay the capital-increase funds and shoulder the remaining debt and payment-guarantee obligations has become more important than simply choosing the prospective buyer offering the highest price. This is because the company needs to lay the groundwork for a management turnaround during the debt repayment deferral period.
A source in the IB industry pointed out, “This transaction is more about injecting new capital into JoongAng Ilbo than enabling existing shareholders to recover their investment,” adding, “Not only the bid price but also the certainty of financing and the payment schedule will be important factors in selecting the preferred bidder.” 
Meanwhile, the sellers plan to make an overall assessment of the acquisition prices, financing plans and other factors based on the final-round proposals, and select a preferred bidder by the end of this month.
[email protected] Kim Gyeong-a, Kim Hyeon-jeong Reporter