Dongwon aims to raise $457 mn for HMM purchase

[Courtesy of Dongwon Group]

South Korea’s Dongwon Group is reportedly prepping a 600 billion won ($457 million) fundraising plan via its subsidiary StarKist Co., ahead of the group’s bid to acquire the nation‘s largest container carrier, HMM Co., scheduled for later in November.

According to investment banking industry sources on Wednesday, Dongwon Group decided to issue convertible bonds (CBs) for StarKist to raise about 500 to 600 billion won, with a potential initial public offering plan for the subsidiary as a condition. Dongwon Group is currently negotiating with three major domestic private equity funds (PEFs), including IMM Private Equity Inc., Q Capital Partners Co., and Korea Investment Private Equity. Some of the funds recently visited StarKist’s U.S. headquarters to conduct due diligence.

StarKist is the leading canned tuna company in the U.S. market and is wholly owned by parent company Dongwon Industry Co. Dongwon Industry acquired StarKist in 2008 for about $3.63 million, together with Korea Development Bank (KDB) and PEFs, securing full ownership later. StarKist turned profitable within six months of the acquisition and has since grown to become a company accounting for about half of the U.S. canned tuna market. StarKist’s sales revenue hit 1.099 trillion won in 2022, up 20 percent from the previous year, and its annual operating profit stands at around 120 to 130 billion won every year, making it a lucrative business.

Dongwon Group hopes to gain momentum in the bid for HMM’s acquisition via this fundraising, with HMM’s value estimated to be between 5 to 7 trillion won. Dongwon Group was selected as a qualified acquisition candidate in September, along with Harim Group and LX Group, and has been conducting due diligence since then.

With the due diligence process recently completed, all three candidates are now in the process of setting prices for the main bid scheduled for November 23. Apart from acquisition financing, Dongwon Industry reportedly needs to secure 2 to 3 trillion won for the acquisition. As the StarKist fundraising plan becomes more concrete, Dongwon Group is accelerating its efforts to secure funds for the HMM acquisition, and, according to investment banking industry sources, appears to have already secured a substantial amount of funds.

Dongwon Group has been considering plans to take three of its non-listed subsidiaries public since September 2023 while also seeking related pre-IPO plans. They include Dongwon Loex, Dongwon Home Food, which is fully owned by Dongwon F&B Co., and StarKist.