Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
KCC pursues change by acquiring wallpaper maker
From left are KCC Chairman Chung Mong-jin and KCC Glass Chairman Chung Mong-ik. Courtesy of each firm
By Lee Min-hyung
By Lee Min-hyung
KCC is seeking to change its management structure by acquiring Shinhan Wallcoverings, Korea's third-largest wallpaper manufacturer.
According to the local investment banking industry, the chemical and building materials maker was chosen recently as the preferred bidder to take over the Seoul-based wallpaper producer. The value of the deal is known to be worth 150 billion won.
The focus is on whether the KCC-led consortium ― led by KCC Glass ― will be able to finish its governance structure reshuffle after the deal.
Industry officials say KCC's takeover of Shinhan Wallcoverings is aimed at revving up the stock value of the glass-producing affiliate.
KCC Chairman Chung Mong-jin and KCC Glass Chairman Chung Mong-ik are expected to swap shares shortly after finalizing the acquisition of the wallpaper manufacturer. This will enable them to bolster their management control of the companies.
Under the scenario, both sides can benefit from the exchange of stocks. Chung Mong-ik is the largest shareholder of KCC Glass with a stake of 20.66 percent, and his influence is expected to expand further after the possible stock exchange with his brother. Chung Mong-jin can also take advantage of the deal by acquiring a bigger stake in KCC through the stock swap with his younger brother.
KCC Glass hopes to increase its stock value through the acquisition of Shinhan Wallcoverings. KCC shares were traded at 308,000 won, while KCC Glass's share price stood at 60,100 won as of Friday.
It remains to be seen if the KCC consortium will be able to finalize the acquisition of Shinhan Wallpaper, but there stands little chance that the chemical and building materials manufacturer will decide to give up the race.
KCC is one of Korea's top-tier interior materials manufacturers, alongside Hanssem and LX Hausys. After taking over the wallpaper producer, KCC is expected to diversify its sales structure and strengthen its market position.
Korea's wallpaper market is expected to become an oligopoly, with three companies ― Shinhan Wallcoverings, LX Hausys and Gaenari Wallpaper ― securing a combined market share of 64 percent as of the end of 2020, up 5.3 percentage points from 2016.
A group of 20 potential investors have shown interest in acquiring Shinhan Wallcoverings thanks to its stable earnings structure and stronger market position, since the firm was officially put up for sale in May this year. Three strategic investors ― KCC, American Standard, Nox Flor ― and a private equity fund made it onto a shortlist of bidders in early August.