이 기사는 2021년 09월 14일 07:54 thebell 에 표출된 기사입니다.

The signing of a stock purchase agreement (SPA) between private equity (PE) firm IMM PE and Hanssem is expected to be delayed to the end of September from the originally scheduled early September.

The two parties said the signing has been delayed due to the delay in due diligence but industry watchers widely believe the postponement is mostly due to the negotiations on the price tag.

IMM PE is expected to sign the SPA with Hanssem in the last week of September to buy the South Korean furniture manufacturer, industry sources said on Friday. The two parties said it has taken longer than expected to conduct due diligence on the company.

This means that the companies will spend around two months on conducting due diligence given that the PE firm started the due diligence process in early July. The PE firm seems to be performing thorough due diligence on the target given that due diligence process normally takes five to six weeks.

“Hanssem is such a large company with many offline stores, and this delays the due diligence process,” said a source familiar with the deal.

However, some market watchers said the two parties may be carrying out the last-minute negotiations on the acquisition price. Samil PwC, which conducted due diligence on Hanssem, already completed its mergers and acquisitions (M&A) investment report one or two weeks ago and IMM PE reportedly conducted an internal investment report shortly after that.

The South Korea’s largest furniture and home furnishing company is seeking to sell itself for around 1.5 trillion won ($1.28 billion), or 220,000 won-250,000 won apiece, which is more than twice the Hanssem’s recent stock price of 110,000 won-120,000 won. Market watchers said the acquisition price is far from low even after taking the premium for the management rights into consideration.

The prospective buyer, however, believes it is appropriate to buy the company for between 1.2 trillion won and 1.5 trillion won.

IMM PE may cut the acquisition price by around 7% of the total cost. If the price tag is set at 1.5 trillion won, the PE firm can lower the price by around 100 billion won. In this case, IMM PE’s funding plan may change from current 300 billion won funded from its own fund, about 300 billion won from its strategic investor Lotte Shopping, and 900 billion won from debt financing.

In its due diligence, the IMM PE has focused on verifying Hanssem’s financial and non-financial information, including its assets, liabilities, and business divisions, as well as the achievement of estimated profits, business prospects, risk of contingent liabilities, and relations with the labor union.

Hanssem’s ESG (environment, social, governance) management is also likely to have reviewed during the process after the company’s brand image has been hit hard by a series of scandals in recent years.

IMM PE seeks to carry out various bolt-on strategies by teaming up with its strategic investor Lotte Shopping to maximize Hanssem’s potential.

Hanssem’s remodeling business has grown fast since the outbreak of the Covid-19 pandemic. Its remodeling brand Rehouse posted revenue of 568.1 billion won in 2020, up around 33% from 426.3 billion won in 2019. The company’s revenue increased from 1.93 trillion won in 2018 to 2.07 trillion won in 2020, with its operating profit increasing from 56 billion won to 93.1 billion won and operating margin from 2.9% to 4.5%, respectively. (Reporting by Ha-na Suh)