Foxconn joins bidding war for Tongyang Magic

[THE INVESTOR] Taiwan’s Hon Hai Precision Industry, more widely known as Foxconn, is joining a bidding war to acquire Tongyang Magic, a South Korean appliance maker whose key business includes water purifier rental service.

According to news reports on Aug. 2, Foxconn has recently hired a global securities firm as the deal advisor. The deal is expected to be carried out through Japan’s Sharp that the company acquired in April. 

“Foxconn sees business synergies among its manufacturing prowess, Sharps’ brand power and Tongyang Magic’s marketing capability,” an industry source was quoted as saying by the Korea Economic Daily.

Tongyang Magic’s largest shareholder Glenwood Private Equity and NH Private Equity, both based in Korea, put the firm up for sale recently. The preliminary bidding is scheduled to be held in November.

Korean food and entertainment giant CJ Group is also hinting at its intention to participate in the bidding. Some Chinese investors are also said to have keen interest in the deal.

Industry watchers predict the final deal price could reach 500 billion won (US$432 million). The Gleenwood-NH consortium acquired the company for 316 billion won in 2014.

Investors have shown keen interest in the nation’s top water purifier rental companies due to their strong client base and future growth potential.

The market leader Coway whose largest shareholder is local private equity firm MBK Partners had been seeking a new owner. But the talks have been stalled this year amid public outcry over its cover-up of defective products containing nickel.

Considering the Coway deal is priced at about 3 trillion won, Tongyang’s far more affordable price is attracting investors currently.

Tongyang Magic logged 390.3 billion won in sales and 38.3 billion won in operating profit last year.

By Lee Ji-yoon (jylee@heraldcorp.com)