By Lee Hyo-sik
The E-Land Group, a midtier conglomerate specializing in the fashion and retail sectors, is a business empire seeking growth through a merger and acquisition (M&A) strategy.
Over the past two years it has absorbed 10 fashion brands and leisure companies at home and abroad to become a powerhouse presence in Korea and China.
In recent months however, ELand’s M&A hit a snag when it failed to acquire a Major League Baseball team and a footwear manufacturer in the United States.
Some analysts speculate that the failed M&A attempts indicate that the group is running out of money after already spending billions of dollars to finance a series of corporate takeovers.
Since detailed financial information on E-Land is not publically available because most of its affiliates are not listed on the stock market they also say it is risky to take what the group states about its financial health.
“It is hard to pinpoint why the group failed to take over the Dodgers and CBI, with only limited information available concerning its financial status. As ELand has said, it decided to give up on the bids because it did not want to pay more than what they initially wanted to pay,” said a retail industry analyst at a domestic securities firm, who asked not to be named.
Due to prior success, the two consecutive M&A failures have raised questions about why it could not acquire these muchcoveted prizes.
“Who knows, the company may be grappling with a cash shortage after spending large sums of money to take over other businesses.
We will probably have to wait and see which one turns out to be the case,” he added.
E-Land dismisses the doubts over its financial soundness, saying its bottom line is stronger than ever. Its retail units here and in China have been generating a stable cash flow, the company said, adding it does not have to go public to raise funds for business expansion.
E-Land was founded in 1980 by Chairman Park Sung-su and started from a small clothing shop in Seoul. But Park has turned his humble beginnings into the country’s 60th largest business group generating revenue of 8.7 trillion won ($7.5 billion) in 2011.
Over three decades, the company took over more than 20 entities, becoming a retail- and fashion-centered conglomerate with 60 affiliates. E-Land has not raised funds by listing shares on the bourse to finance its M&As. It instead secured necessary funds by issuing bonds or taking out loans from financial institutions.
Among 60 subsidiaries, local fashion firm Deconetishion is the only publically traded entity. The company was listed before ELand bought it out.
However, the group failed in its two latest M&A attempts in the United States, spoiling its perfect track record.
Early this month, E-Land said it was not selected as a preferred bidder for American footwear maker Collective Brands Inc.
(CBI). The firm reportedly set aside $1.8 billion to acquire CBI, which operates popular Payless ShoeSource stores. It offered to buy the discount footwear retailer at little less than $20 per share.