Hanwha VP plans $40 m tender offer for Hanwha Galleria shares

[Photo by Yonhap]

Hanwha Galleria Co. Vice President Kim Dong-sun will launch a 54.4 billion won ($40.5 million) tender offer amid the company‘s recent poor performance.

According to investment banking sources on Thursday, Kim will tender for 34 million common shares, or a 17.5 percent stake in Hanwha Galleria. The offer price of 1,600 won per share is 23 percent higher than the previous trading day’s close of 1,303 won and 34 percent above the average closing price over the past month. The tender offer will run from Friday through September 11th, 2024, with NH Investment & Securities Co. managing the process. If it is successful, Kim‘s stake in the company will rise to 19.82 percent from 2.32 percent.

The move is seen as an attempt to enforce more responsible management, with Hanwha Galleria posting an operating loss of 4.4 billion won in the second quarter of 2024 according to Thursday’s regulatory filing. The second quarter was the first in which the company’s year-on-year figures were available since it went public in March 2023.

The retail industry is detecting a slide in Galleria Department Store’s competitive edge, as rivals have challenged its premium image. According to Statistics Korea data, Hanwha Galleria‘s market share in the department store sector for the first half of 2024 was 6.5 percent, down 0.3 percentage points from the end of the previous year and continuing to decline from 2021’s 8.1 percent. The stock price, which was above 2,000 won at the time of listing, recently hovered around the 1,300 won mark.

Critics argue that Kim should focus on rebuilding Hanwha Galleria’s core strengths, given that more than 90 percent of its sales in the first half of 2024 came from department stores. Kim has already demonstrated his commitment to responsible management by buying back shares several times during the year. He formed a new unit earlier in August to develop a strategy for the group‘s retail division and opened a new office focused on exploring food and beverage opportunities, with these moves seen as an effort to restore the department store’s competitive edge.

Market observers are watching closely to see if the bid is successful. Hyundai Home Shopping Network Corp. succeeded in a similar tender offer in April by offering a premium in the 30 percent range, with 1.8 times more minority shareholders participating than the 25 percent stake offered., Hanwha Galleria‘s minority shareholders held 58.27 percent of the company as of the end of June, 3.4 times the 17.5 percent stake Kim is seeking.

The tender offer is also expected to shed some light on Hanwha Group’s succession plan, with Kim Dong-kwan, the eldest son of Hanwha Group Chairman Kim Seung-youn, overseeing the defense and energy sectors, while second son Kim Dong-won and third son Kim Dong-sun are in charge of the financial and retail and leisure businesses respectively.