According to investment banking (IB) industry sources on the 24th, Shinsegae Co.,Ltd has joined the Daewoo Kiwoom-CJ Corp. consortium, which was selected as the preferred bidder for the acquisition of the JoongAng Ilbo. All six shortlisted candidates (Daewoo Kiwoom, ORION, Global Sea, OK Financial, E-Broadcasting, and Geumbo Development) that submitted letters of intent during the preliminary bidding participated in the final round, and among them, the Daewoo Kiwoom consortium emerged as the frontrunner. SamIl Accounting Firm is serving as the lead advisor for the JoongAng Ilbo sale.
Preferred bidder selected in just three months—a stark contrast to JTBC, which is undergoing court proceedings
Industry observers note that the JoongAng Ilbo sale is proceeding at an unusually rapid pace. JoongAng Ilbo, which entered a workout program last July, selected the preferred bidder on October 19—just about three months later—on the very day of the final bidding. This stands in contrast to JTBC, which is undergoing court-led restructuring and has had its sale announcement pushed back to November. The purchase price is reportedly around 500 billion won, while other bidders are said to have offered between 300 billion and 400 billion won.
Given the swift progress leading up to the selection of the preferred bidder, the creditor group plans to aim for the company to complete the workout program by the end of the year. With 147.4 billion won in corporate bonds maturing sequentially from next month through the end of next year, the goal is to restore the company to normal operations through a swift sale.
This sale will take the form of a third-party private placement, in which the acquirer receives new shares. This is because purchasing existing shares would result in the proceeds going to existing shareholders, whereas acquiring new shares directs funds into the company, where they can be used to repay debt and improve its financial structure. As of late June, the JoongAng Ilbo’s total debt stood at 431.1 billion won, placing it in a state of partial capital impairment, where total equity (28.7 billion won) falls short of paid-in capital (33.0 billion won).
While a plan to conduct the capital increase after a stock split—which reduces the number of outstanding shares—has been discussed, it is understood that a plan to proceed with the capital increase without a stock split also remains an option. In either case, the plan is to issue a large number of new shares to inject funds directly into the company without giving the owner’s family the opportunity to sell their existing shares.
Cooperation from Major Shareholders Is Key… KIWOOM Securities Issue Also a Variable
However, there are still significant hurdles to overcome. Currently, the combined stake held by major shareholders—including Joongang Holdings (64.73%) and Seok Hyun Hong (15.63%)—along with related parties, stands at around 80%. A resolution at a shareholders’ meeting is required to proceed with a capital reduction, but since the largest shareholder, Joongang Holdings, is undergoing corporate rehabilitation proceedings, the rehabilitation court’s ruling could become a variable in the process. Some interpret that the fact that proceeding with a rights offering alone—without a capital reduction—remains an option is not unrelated to these circumstances. Even if a selective capital reduction were applied to only certain shareholders, the consent of those shareholders would still be required, so the reaction of the Hong family is also considered a variable.
Consent from a meeting of bondholders is also essential. JoongAng Ilbo’s corporate bonds are subject to covenants restricting changes in the largest shareholder, so consent regarding this matter must be obtained. Individual investors who suffered losses are another variable. The joint legal team representing victims of JoongAng Group’s bond losses is representing 286 individuals with a total authorized debt amount exceeding 30 billion won. However, since the acquisition proceeds are structured to be used for debt repayment, observers predict that the focus will likely be on negotiating repayment terms rather than outright opposition.
If Daewoo Kiwoom completes the acquisition, issues involving KIWOOM Securities will also arise. KIWOOM Securities is facing investigations by financial authorities and legal action over allegations of mis-selling and selling bonds while aware of their poor quality, stemming from its non-face-to-face sales of electronic short-term bonds issued by JTBC and JoongAng Group affiliates to individual investors. KIWOOM Securities maintains that the sales were lawful, arguing that investors purchased the products directly without any investment recommendations. Some have also pointed out that if the securities firm facing the lawsuit becomes the owner of the JoongAng Ilbo, concerns regarding editorial independence and the credibility of its reporting could arise.
