Eugene Group wins bid for 31% stake in YTN

[Courtesy of Eugene]

South Korea’s Eugene Group won its bid to acquire a 30.95 percent stake in YTN Co., a news channel owned by KEPCO KDN Co. and the Korea Racing Authority (KRA). The acquisition process expected to take two to three months to complete as it requires contract signing with the seller and the approval by the Korea Communications Commission (KCC).

According to the investment banking (IB) industry on Monday, Eugene Group was selected as the bid winner for the stakes held by KEPCO KDN and the KRA. The company submitted the highest bid price of about 320 billion won ($236.86 million) at Grand Hyatt Seoul in Jung District, Seoul, where the bid opening was hosted by Samil Pricewaterhousecoopers, the lead manager of the YTN sale.

The acquisition was a three-way battle, with Eugene Group, Hansae Co. and the Global Peace Foundation submitting bid applications by the deadline on Friday. “Eugene Group and Hanse submitted higher prices than the Global Peace Foundation, and, between those two, Eugene Group was named the higher bidder as it suggested a slightly higher price,” an official familiar with the matter said.

Earlier on September 8, KEPCO KDN and the KRA issued a preliminary notice to jointly sell their YTN stakes of 21.43 percent and 9.52 percent respectively. The two companies announced that day that they would sell a total of 13 million shares, or a 30.95 percent stake, of their combined holdings and hold the auction on Monday.

The sale was conducted in the form of an absolute auction, where the sales is awarded to the highest bidder. Eugene Group’s offer of 320 billion won appears to factor in not only the value of shares, but also that of YTN’s assets and the benefit of managerial control.

The market cap for YTN, which is listed on the Kosdaq market, was close to 400 billion won until recently. But the stock fell by 15.47 percent from the previous day on Friday and again by 13.54 percent on Monday to 6000 won per share, while its market cap also dropped to 252 billion won. Although this puts the value of its 30.95 percent stake at around 79 billion won, some analysts note that YTN’s assets alone are worth 700 billion won when factoring the Namsan Seoul Tower, its headquarters YTN Newsquare in Sangam, Seoul which YTN owns, and retained earnings in the 100 billion won range.

Eugene Group, engaged in several businesses with more than 50 affiliates including construction, is known to have long been interested in acquiring a media company. “Yu Seok-hoon (42), the eldest son of Eugene Group Chairman Yu Kyung-sun, is interested in managing a media company, so he jumped at the chance to acquire YTN,” an official familiar with the industry said.

Of note to analysts is that Eugene Group could have been aiming for the synergies that would be generated by acquiring a media company, and recently made efforts to enter the business-to-consumer (B2C) market, going beyond selling construction materials and selling goods directly to consumers. Eugene Group, led by Eugene Corp., the nation’s top ready-mixed concrete company, focuses on business-to-business (B2B) transactions and recently won public attention by launching new B2C businesses, including the management of Ace Hardware stores specializing in home repairs.

In broadcasting, the company invested in Dream City, a system operator (SO) in Bucheon and Gimpo, in 1997, and went on to acquire Eunpyeong Broadcasting to operate a cable television business with 400,000 subscribers in Bucheon, Gimpo, and Eunpyeong. However, it exited the broadcasting sector in 2006 after selling its stake in Dream City to CJ O Shopping Co. for 358.1 billion won. The company’s YTN stake thus allows Eugene Group to return to the broadcasting sector after a 17-year break.

The selling side will sign the agreement on the stake acquisition after some final decision-making, including board approval. It expects the transaction to close within two to three months after signing the agreement, given KCC’s approval process.