This article was published on April 2, 2025, at 4:46 p.m. on the ChosunBiz MoneyMove site.
Aekyung Group, ranked 62nd in business circles, noted it is reviewing the sale of Aekyung Industrial. Aekyung Industrial, which started in 1954 as Aekyung Yujigongyeop, is the parent company of Aekyung Group and owns brands such as 'Kerasys,' '2080 toothpaste,' and cosmetics 'Luna.'
However, Aekyung Group did not plan to sell Aekyung Industrial from the start. Currently, the group’s top priority for sale is the golf course, Jungbu Country Club (CC). Inside the group, it is believed that if Jungbu CC sells for a good price, Aekyung Industrial does not need to be put on the market. Selling Jungbu CC alone could address immediate urgent issues.
Nevertheless, the reason for pulling out the card of selling Aekyung Industrial is Jeju Air. Aekyung Group is said to have discussed recovery plans with creditors, including the Korea Development Bank, for financial support for Jeju Air before considering the sale of Aekyung Industrial. If Aekyung Group secures cash by selling Aekyung Industrial, it is expected to help Jeju Air, which is facing a crisis due to a major accident, as well as provide financial support to Aekyung Asset Management, the family company of the owner family.
◇ “If Jungbu CC sells well, Aekyung Industrial might not be sold.”
On the 2nd, according to the investment banking (IB) industry, AK Holdings recently selected Samjong KPMG as the lead manager for the sale of management rights for Aekyung Industrial. Samjong KPMG is in the stage of contacting potential buyers who might be interested in Aekyung Industrial. An IB industry official said, “However, nothing has been progressed yet,” and “I understand that even a teaser letter has not been created.”
Samjong KPMG is also overseeing the sale of Jungbu CC, which is owned by Aekyung Group. Jungbu CC is an 18-hole member-only golf course located in Gonjiam, Gyeonggi Province, and is considered one of the prestigious golf courses in the Seoul metropolitan area.
A golf industry official stated, “For something like Jungbu CC, it could fetch between 9 billion won and 10 billion won per hole,” adding, “However, it needs to be confirmed how much the membership liabilities are to predict how much will actually come into the group.”
Jungbu CC is a 100% subsidiary of Aekyung Chemical. If Jungbu CC is sold for 10 billion won per hole, the sale price would be 180 billion won. Based on the end of last year, the liquid membership fees (accounts that are likely to be refunded) were 26.9 billion won, and the golf course membership fees were 7.8 billion won, so the actual money flowing into Aekyung Chemical is estimated to be about 145 billion won.
An industry source said, “Whether to actually pursue the sale of Aekyung Industrial still depends on Jungbu CC,” adding, “If Jungbu CC sells well and resolves the urgent issues, Aekyung Industrial, the group’s parent, might not be sold.”
◇ Selling Aekyung Industrial would bring cash inflow to Aekyung Asset Management… the Chae family holds 100% equity.
If Aekyung Group actually proceeds with the sale of management rights for Aekyung Industrial, it is presumed to be for various reasons. Firstly, the golf industry continues to decline, and it is uncertain whether Jungbu CC can be sold for 10 billion won per hole.
Also, because Jungbu CC is a wholly-owned subsidiary of Aekyung Chemical, all the sale proceeds will flow into Aekyung Chemical. Although Aekyung Chemical also needs funding, it could potentially transfer funds to its parent company, but due to the equity structure, it could be cumbersome. AK Holdings owns 60.3% of Aekyung Chemical’s equity.
On the other hand, Aekyung Industrial has its equity directly held by AK Holdings and Aekyung Asset Management, allowing these two companies to directly receive the sale proceeds. Due to this equity structure, AK Holdings and Aekyung Asset Management have been able to borrow using Aekyung Industrial’s equity as collateral to support affiliates. Currently, AK Holdings has provided 43.63% of its holding of 45.08% of Aekyung Industrial’s equity as collateral. Aekyung Asset Management also has 15.96% of its held 18.05% of equity tied as collateral. However, the likelihood of a forced sale is currently minimal as the collateral evaluation ratio has not fallen below the maintenance ratio.
AK Holdings is expected to continue financial support for Jeju Air if cash flows in from the sale of Aekyung Industrial. Jeju Air has faced worsening fiscal difficulties due to the aftermath of the Muan Airport disaster at the end of last year. During the two days from December 29 to 30 of last year, there were 68,000 cancellations of flight tickets. At that time, Jeju Air received over 260 billion won in reservation fees from ticket sales, which raised concerns about significant losses from refunds.
AK Holdings is said to have been discussing funding support for Jeju Air with creditors including the Korea Development Bank until recently. Institutions that provided collateral loans to AK Holdings include the Korea Development Bank, Industrial Bank of Korea, and Kookmin Bank.
Some believe that receiving aviation accident insurance premiums could improve Jeju Air’s cash flow, but the aviation industry is facing intensified competition due to the entry of major conglomerates and private equity funds, making funding difficult.
Aekyung Asset Management is also expected to ease its cash flow if proceeds from the sale arrive. As of the end of 2023, Aekyung Asset Management's current liabilities (debts due within a year) were 61.6 billion won, which was more than 20 times its current assets (assets convertible to cash within a year) of 2.9 billion won.
Aekyung Asset Management is a family company 100% owned by Vice Chairman Chae Hyung-seok and his brother, Vice Chairman Chae Dong-seok, and holds a 19% equity stake in AK Holdings through a 'roof-over-roof' structure. Chae Hyung-seok's son, Chae Jeong-kyun, has also acquired some equity as the only third-generation owner, raising projections that Aekyung Asset Management will play a crucial role in the future succession of management rights.
◇ “Being a listed company is a hindrance... private equity funds find it hard to buy.”
The market is watching how much corporate value Aekyung Industrial can be recognized for. An IB industry official said, “It is a company with clean debt relationships and good annual sales, so strategic investors (SI) may show interest in it as a sale item.”
However, evaluations indicate that being a listed company limits the ability to attach a management premium. Aekyung Industrial's market capitalization is around 420 billion won, while the market value of the management equity (63.38%) that has come up for sale is approximately 260 billion won. If the group attaches a 100% management premium as desired, it could receive a valuation in the 500 billion won range, but industry insiders believe that this will not be easy. The fact that sales are overly concentrated in China is also cited as a disadvantage.
The difficulty for financial investors (FI) such as private equity fund (PEF) operators to engage in this deal is also expected to become a hindrance to the sale's success. A representative from a PE firm stated, “If you pay a high premium to buy a listed company, the risk is too great if the stock price falls in the future,” adding, “First, you have to buy the management equity and then conduct a public purchase of the remaining shares to delist it, but it is questionable how many PEs are willing to take that burden.”