KoreaCenter acquires Danawa, paving way for MBK’s bolt-on deal

KoreaCenter Co. has been named the new owner of Danawa Co., one of South Korea’s first-generation e-commerce platforms – a move that is expected to pave the way for MBK Partners to acquire the two companies in a bolt-on deal.

KoreaCenter, which helps create e-commerce websites for retailers, will sign a share purchase agreement as early as Friday, according to investment banking sources.

KoreaCenter will be acquiring a combined 51.3% stake in Danawa from its largest shareholder and board of directors Chairman Sung Jang-hyun, and related shareholders for about 350 billion won ($293 million).

KoreaCenter was among the four final contenders for Danawa during a public tender last week, which drew other bidders such as Seoul-based private equity firms KG Group and VIG Partners.

Founded in 2000, Danawa started as a platform providing price comparisons mostly for computer parts. It has since expanded its business to include a much broader range of products. The company also runs a separate shopping channel and an online secondhand marketplace.

Danawa has racked up a steady revenue and profit stream in the increasingly competitive domestic e-commerce market.

The company posted an average annual revenue growth rate of 23% between 2018 and 2020, outperforming the Korean e-commerce market’s 19% growth rate over the same period. Danawa’s annual operating profit margin reached 16% in the cited period.

“Price comparison services are quite labor-intensive. Platform giant Naver also offers a similar service, but price comparisons can’t be fully automated. Danawa, with its years-long know-how, has an edge over its rivals,” said an industry official.

MBK’S BOLT-ON ACQUISITION

MBK Partners, a North Asia-focused private equity firm, has shown interest in the management rights of both KoreaCenter and Danawa in a package deal.

Earlier this month, industry sources said MBK is in talks to buy the two Kosdaq-listed e-commerce platforms through a bolt-on acquisition, a deal estimated at about 1 trillion won.

Under the deal, MBK will first buy existing and new shares of KoreaCenter, which in turn will use the proceeds from the share sale to buy into a controlling stake in Danawa.

MBK Partners also used the add-on acquisition method to acquire Japan's largest golf course operator Accordia Next Golf and another Japanese golf management firm, Next Golf Management.

Last week, MBK said it is selling Accordia to SoftBank's Fortress Investment Group for 400 billion yen ($3.5 billion), creating over threefold returns.

COMBINATION TO CREATE SYNERGY

Founded in 2000, KoreaCenter runs several e-commerce platforms. Among them are the country's No.1 shop for overseas direct purchases; MakeShop, South Korea's No. 2  website builder for small- and medium-sized retailers; and SummercePlatform Inc., a price comparison website.

Back in 2018, KoreaCenter had discussed a merger with Kakao Corp., the country's mobile giant, but their talks collapsed due to price differences.

Industry watchers said KoreaCenter’s acquisition of Danawa will create synergy in its big data-driven e-commerce division, given that Danawa's businesses largely overlap with those of KoreaCenter's SummercePlatform.

KoreaCenter runs 10 fulfillment centers in six countries, including the US, China and Germany.

In Korea, the company acquired eNuri.com, another price comparison services platform, for 100 billion won in 2018.

In an annual newsletter to investors last March, Michael ByungJu Kim, MBK's founder and chairman, said his firm would take into account technology elements such as big data and digitalization when investing in the consumer sector.

Write to Jun-ho Cha and Chae-yeon Kim at chacha@hankyung.com
In-Soo Nam edited this article.