By Lee Hyo-sik
The E-Land Group, a mid-tier conglomerate specializing in fashion and retail, is struggling to clear suspicions that it is operating multiple paper companies.
Such firms are normally set up in tax havens to evade paying taxes. Or they can be established for businesses to raise slush funds or to engage in other corporate irregularities.
According to the Fair Trade Commission (FTC), Wednesday, E-Land Group had 30 subsidiaries as of June. This is more than other similar or larger business groups operate. For instance, Halla Group has 23 affiliates and SeAH Group has 25.
Among E-Land’s 30 units, many have been shut down or are undergoing liquidation. But they are still registered with the anti-trust agency as the group’s affiliates, raising suspicions that it may be maintaining non-operating subsidiaries to use them for ``other’’ purposes.
Freemont, E-Land’s online education website, and H&L Developer, its real estate unit, still exist on the business registry but employ no workers.
A half dozen other E-Land affiliates, including The Show Entertainment and Global Sports, have filed for business closure with the National Tax Service over the years. But they are still registered with the FTC as E-Land affiliates.
Industry watchers say the suspicion that E-Land is maintaining paper companies, results from its past aggressive merger and acquisition (M&A) drive. All the firms suspected of being E-Land paper companies are mostly units of firms acquired over the years.
They point out that detailed information on E-Land and its subsidiaries is not publically available because most of its affiliates are not listed on the stock market. Only two _ fashion firm Deconetishion and theme park E-World _ are publically traded entities. The companies were listed before E-Land bought them out.
In response E-Land dismissed such speculation, saying the group does not operate any paper companies.
``We have acquired many corporations over the years. When the M&As were completed, unnecessary units of bought-out firms have been closed. We shut them down and reported it to the tax agency,’’ an E-Land executive said. ``But the anti-trust agency requests us to keep them registered for up to 5 years. They say we need to do so to settle possible claims and future obligations.’’
Meanwhile, E-Land has been selected as a preferred bidder by creditors of Ssangyong Engineering & Construction (E&C) to acquire one of Korea’s largest builders.
The Korean Asset Management Corporation (KAMCO), the largest stakeholder which owns a 38.75-percent stake in Ssangyong E&C, has abandoned an open competition designed to raise the sale price after its third attempt to sell the builder floundered on June 15.
KAMCO-led creditors have decided to relinquish a 50.02 percent stake in Ssangyong by means of a private contract. E-Land was the only party interested in buying it.
It remains to be seen whether E-Land will be able to acquire the builder as Ssangyong’s union strongly opposes its takeover bid.
E-Land was founded in 1980 by Chairman Park Sung-su and started from a small clothing store in Seoul. But Park has turned his humble beginnings into the country’s 60th largest business group. In 2011, it generated revenue of 8.7 trillion won ($7.5 billion).
Over three decades the company took over more than 20 entities to become a retail- and fashion-centered conglomerate.
Among the notable new assets it acquired was French retailer Carrefour’s outlets in Korea at 1.7 trillion won in 2006. Two years later E-Land sold them to Home plus.
The group also bought the local distribution rights for New Balance in 2008, Italian shoemaker Lario in 2010 and Korean brand Elcanto in 2011.
In recent months however, E-Land’s M&A drive faltered when it failed to acquire the LA Dodgers, a Major League Baseball team, and CBI, a footwear manufacturer in the United States.
leehs@koreatimes.co.kr