CJ CheilJedang's affiliates or divisions seem unable to complete major mergers and acquisitions (M&A) as desired. CJ CheilJedang recently announced that it will withdraw all major sales.
According to the distribution industry on the 13th, CJ CheilJedang recently announced the consecutive withdrawal of the sale of its Green Bio division and CJ Selecta. Originally, CJ CheilJedang planned to improve its financial structure and participate in large-scale mergers and acquisitions to strengthen competitiveness using the cash obtained from these sales.
It must be noted that the responsibility for withdrawing the sales lies significantly with the buyers. In the case of the Green Bio division, the private equity fund MBK first expressed a buying interest, but the situation became unclear due to problems with Homeplus, another investment associated with MBK. An investment banking industry insider said, "We had discussions because they expressed interest in buying, but a lukewarm response followed, leading to the cessation of the transaction."
CJ CheilJedang has also abandoned the sales plan for CJ Selecta, which was announced in 2023. CJ Selecta is the world's largest producer in the concentrated soybean protein (SPC) sector used for animal feed. CJ CheilJedang planned to sell a 66% stake for about 480 billion won. CJ CheilJedang stated, "The buyer was a subsidiary of an American grain company, but it appeared unlikely that the preconditions would be met, so we withdrew the sales plan."
Consequently, the industry evaluates that CJ CheilJedang has less capability to enter the large M&A market. After acquiring the American frozen food company "Schwann's" in 2019, CJ CheilJedang established a basis for growth in the U.S. market. It aimed to discover a "second Schwann's" to ascend as a global comprehensive food company, but now lacks the financial resources.
On an individual basis, CJ CheilJedang's cash and cash equivalents stood at 96.7 billion won last year. This is a decrease of 84.7% compared to the previous year's cash and cash equivalents (635.3 billion won).
An investment banking industry insider noted, "We had hoped to make another leap by successfully completing major mergers and acquisitions, but the situation has not unfolded as planned. While it is possible to engage in mergers and acquisitions using borrowed money, there is a clear difference between having a cash reserve and not having one."
However, there are many difficulties in reviving departments that have already been marked as non-core businesses for sales. The issue is that members recognize that these may be resold later if management conditions improve and suitable buyers appear who will properly value them. This means it is not easy to motivate capable talent to contribute to the company in the long term.
However, CJ CheilJedang evaluates the internal withdrawal of the two sales as rather favorable. It particularly elaborates on the withdrawal of the Green Bio division.
The largest revenue component from the Green Bio division is "lysine," and this is due to the factors that may give CJ CheilJedang an advantage amid the trade war between the U.S. and China. CJ CheilJedang believes it has a competitive edge over European and Chinese rivals, as it owns a manufacturing plant in the U.S.
However, this advantage may not last long due to global political uncertainties. Just recently, the U.S. and China agreed to lower the tariffs they have imposed on each other by 115 percentage points (p) during a meeting held in Geneva, Switzerland, from the 10th for two days. As a result, the U.S. tariff on Chinese products will drop from 145% to 30%, and the Chinese tariff on U.S. products will fall from 125% to 10%.
An anonymous securities analyst stated, "The trade war between the U.S. and China is tightening and loosening, but ultimately it has a structure that will inevitably lose to low-cost lysine from China," adding, "I still maintain the view that the efforts to push for sales were a positive sign."
Another securities analyst commented, "The sales should have gone through to resolve the undervaluation," and added, "With the successive withdrawals of the sales, we missed the opportunity to enhance corporate value once again and now need to find another chance, which is unfortunate." Attention is drawn to whether CJ CheilJedang will discover a second Schwann's and lay the groundwork for a leap into the global market.