Domestic Furniture Leader 'Hanssem', Succession Issue Calls for 'Sale' as Solution

Honorary Chairman Jochanggeon and Related Parties Sell 30% Stake, Estimated at 1.3 Trillion Won

Hanssem Sangam Building.
Photo by Hanssem

[Asia Economy Reporters Kim Jong-hwa and Park So-yeon] The furniture industry shares a nearly unanimous view on the sale of Hanssem, the country's top furniture company. There is no disagreement that the founder and honorary chairman, Cho Chang-geol, aims to resolve succession issues through the sale.

Hanssem, which operates under a professional management system without a successor, has been mentioned as a potential acquisition target in the mergers and acquisitions (M&A) market for several years. The decision to sell at this point is because Cho Chang-geol, born in 1939, is well over eighty years old, and due to the surge in demand for furniture and interior design amid the COVID-19 pandemic, the company can aim for a peak sale price.

On the 14th, a Hanssem official said, "Succession is the core issue. The chairman is elderly, so for a long time, we have been reviewing whether to transition to a holding company structure or to sell," adding, "Although he is still actively involved, he likely wanted to settle matters decisively before other issues related to old age arise."

Potential M&A Target for Several Years

The founder, Chairman Cho, had one son and three daughters, but his eldest son passed away in 2012, and the remaining three daughters do not participate in company management. The shares held by Cho’s children are Cho Eun-young (1.32%, 311,500 shares), Cho Eun-jin (0.72%, 168,750 shares), and Cho Eun-hee (0.88%, 207,400 shares), totaling only about 3%. The low shareholding by the daughters indicates that succession through them was not originally considered.

Hanssem has maintained a professional management system for the past 27 years. From 1994, when Chairman Cho stepped down from frontline management, until 2019, CEO Choi Yang-ha led the company, and since late 2019, CEO Kang Seung-soo has been at the helm.

The ownership structure consists of the founder and largest shareholder Chairman Cho (15.45%), related parties (14.74%), Teton Capital Partners (8.43%), the National Pension Service (6.92%), and others (54.46%). Among these, the shares considered for sale are those held by Chairman Cho and related parties, approximately 30.19%.

About two years ago, Hanssem engaged in sale discussions with global private equity firm Carlyle, domestic PEF MBK Partners, and CJ. Last year, there were rumors of sale negotiations with Shinsegae, and this year, talks reportedly took place with Hyundai Livart at around the 1 trillion KRW level.

An investment banking industry insider hinted, "Negotiations with Hyundai Livart recently took place but ultimately fell through." It is known that IMM Private Equity (PE), Hahn & Company, as well as LG’s home appliance division and SK’s shopping division, have shown interest in the Hanssem acquisition. IMM PE is considered the most likely buyer. It is reported that a memorandum of understanding (MOU) may be signed as early as this weekend for about 1.3 trillion KRW (around 200,000 KRW per share).

At Its Peak Now, Opportunity to Get Full Value

A furniture industry insider said, "With sales and market capitalization increasing, now is the prime time to get a proper price," adding, "Chairman Cho likely judged that he could resolve various internal and external company issues such as successor selection, succession, and corporate management given his advanced age."

Although Hanssem was the first in the furniture industry to surpass 2 trillion KRW in sales in 2017, it had been on a downward trend until before COVID-19. In 2018, sales held steady at 1.93 trillion KRW, but operating profit halved to 56 billion KRW. Sales dropped to around 1.69 trillion KRW in 2019, but performance recovered last year as remote work increased due to COVID-19.

Last year, sales again exceeded 2 trillion KRW, achieving 2.00675 trillion KRW in sales and 93 billion KRW in operating profit. Operating profit margins improved from 2.91% in 2018, to 3.28% in 2019, and 4.50% in 2020. The investment banking sector estimates Hanssem’s value at 200,000 to 250,000 KRW per share, reflecting the internal and external management environment. This is about twice the current stock price, reflecting high growth potential as demand for interior and remodeling increases.

Meanwhile, inside Hanssem, there are many opinions favoring acquisition by a large corporation that can grow and stabilize the company from a long-term perspective rather than by a private equity fund. Hanssem is expected to disclose details related to the sale through a public announcement on the afternoon of the 14th.

This content was produced with the assistance of AI translation services.