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M&As

Strategic buyers line up for IMM-led $1.3 bn Hanssem deal

IMM PE adds LX Hausys to the list of strategic investor candidates for furniture maker Hanssem

By Sep 06, 2021 (Gmt+09:00)

Strategic buyers line up for IMM-led />.3 bn Hanssem deal
LX Hausys Ltd., South Korea's leading building materials maker, on Monday announced a plan to join Seoul-based IMM Private Equity in acquiring a controlling stake worth 1.5 trillion won ($1.3 billion) in Hanssem Co., the country's largest furniture and home furnishing company. 

LX, split off from the LG Group this year, decided at a board meeting to invest 300 billion won ($260 million) in an IMM-led special purpose company (SPC) to be established to buy the management rights of Hanssem as a limited partner, according to its regulatory filing. 

"Our participation in the acquisition aligns with our medium to long-term plan to become a full-fledged interior service company by strengthening our building materials business and improving our position in the home decorations market," an LX Hausys source told Market Insight, the capital news outlet of The Korea Economic Daily.

"If LX Hausys is confirmed as a strategic investor, we expect to further solidify our market position by combining Hanssem's various furniture and home furnishing goods with LX Hausys' premium building materials."

LX Hausys produces flooring materials such as tiles and automotive seat covers.  It was separated from LG Group earlier this year, along with LX Semicon Co., LX International Corp. and LX Holdings Co. to belong to the newly-launched LX Group.

The announcement comes just after Lotte Group, South Korea's retail-focused conglomerate, was said to enter negotiations with IMM PE to invest up to 300 billion won in the SPC to buy a stake in Hanssem, according to investment banking sources last week.

IMM, with $5.4 billion in assets under management, signed a preliminary agreement in July to take over a 30.21% stake in Hanssem from its founder and honorary chairman, as well as from other key shareholders. The stake comes with the management rights.

It is now conducting due diligence study on Hanssem before closing the deal.

The PE firm has been looking for strategic investors which the sources said include Shinsegae Inc. and Hyundai Department Store Co. After reviewing their investment terms and conditions and expected synergy with Hanssem, IMM PE is likely to pick one of them as a strategic buyer this week.
Strategic buyers line up for IMM-led />.3 bn Hanssem deal

COMPETITION AMONG STRATEGIC INVESTORS

It is rare for strategic buyers to compete to participate in a PEF-led acquisition in South Korea's M&A market. Their keen interest in Hanssem underlines the growth potential of the home decorations market. 

The prolonged stay-at-home trend has been driving demand for home decorations and renovations. South Korea's home furnishing market has expanded to 10.2 trillion won in 2020, versus 7 trillion won in 2008, according to Statistics Korea. It is forecast to grow to 18 trillion won by 2023.

LX Hausys, formerly known as LG Hausys, has opened its interior design shops and showrooms in LG Electronics Inc.'s retail shops and E-Mart Inc.'s stores to allow consumers to experience both home appliances and interior designs at one venue.

For Lotte, its electronics retailer Lotte Himart and Lotte Department Store are expected to create synergy with Hanssem's furniture business. Its interior design business is likely to generate synergy with Lotte Engineering & Construction Co.

Hyundai Department Store Group may further expand its furniture unit Hyundai Livart Furniture Co. through a business tie-up with Hanssem. It can sidestep monopoly issues if it invests through a PEF in the furniture maker. 

Shinsegae Group also expects synergy between Hanssem and the domestic furniture brand Casamia Co. which it acquired in 2018.

IMM PE plans to bolster Hanssem's online business to grow it into the dominant No. 1 player in both online and offline markets. In the online area, it lags behind smaller rival Bucketplace, Co., an operator of home interior app OHouse.

With a market capitalization of 2.8 trillion won, the price tag for a 30.21% stake represents a 77% premium to Monday's closing level.

Write to Jun-ho Cha and Gyeong-jin Min at chacha@hankyung.com

Yeonhee Kim edited this article.

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