[M&A Weekly] Toshiba, Carlyle manage to exit failing Korean equity investment

Foreign investors in two Korean companies -- Unison and Yakjin Trading -- managed to sell their stakes earlier this week, but only at significant losses, disclosures showed Tuesday.

The sale price was significantly lower than what the investors -- Japanese conglomerate Toshiba and US private equity firm Carlyle Group -- had paid at least seven years before to acquire the assets.

Toshiba, the largest shareholder of wind turbine maker Unison, has agreed to sell a 13.9 percent stake, or 15.5 million common shares, to a private equity fund managed by Samchully Asset Management, in exchange for 19.8 billion won ($16.7 million) cash.

It bought the shares for 81.6 billion won in 2012, by executing a debt-to-equity swap with bondholders and participating in a capital increase.

However, Toshiba saw the stock price of Unison, trading on the development bourse Kosdaq, spiral downward over the course of eight years. While Toshiba’s Unison purchasing price averaged 5,265 won per share, the price gradually fell due to indebtedness and loss-making business. Unison recorded a 4.1 billion won net loss in 2019, staying in the red for the second consecutive year. In March this year, the share price hit a low of 570 won in the wake of the coronavirus outbreak.

Samchully’s bought the shares for 1,277 won. In addition to the common shares, its fund is expected to buy 25 billion won worth of convertible bonds. The investment house has drawn institutional investors, such as the National Pension Service, to its investment vehicle.

Han Byung-hwa, an analyst at Eugene Investment & Securities, said the change to Korean ownership means Unison can expect more business from Korea’s “Green New Deal” initiative, as the plan will require the development of domestic firms.

In the meantime, Carlyle Group inked a deal Friday with accessories maker JS to sell a 100 percent stake in garment original equipment manufacturer Yakjin Trading.

The transaction -- 14.2 billion won in cash for the entire stake – is also a sharp loss when considering the 204.8 billion won Carlyle bought the company for in 2013 through a leveraged buyout.

Following the takeover deal, Carlyle set up a holding firm in 2013 to control Yakjin with CEO Cho Yong-ro. The holding firm later merged with Yakjin, which gave Carlyle and Cho direct control over the firm.

After a series of failed exit attempts, either by taking the company public or by selling shares, Carlyle signed the deal at a discount Friday in its third sell-off attempt.

JS will pay an additional 45 billion won to refinance Carlyle’s debt.

Yakjin recorded a 1 billion won net profit in 2019, seeing a turnaround from a 13.6 billion won net loss a year prior. The company serves fashion retail clients including multinational players GAP, Banana Republic, Old Navy and L Brands.

By Son Ji-hyoung (consnow@heraldcorp.com)