Why Furniture Company Hanssem Sponsors Golf Tournaments

Despite the worst crisis since the sexual misconduct scandal including poor performance and employee turnover,
sponsorship for the 'KLPGA 2022 Lotte Open' starting from the 2nd
aiming for marketing synergy with potential major shareholder Lotte

Hanssem Sangam-dong Headquarters

[Asia Economy Reporter Kim Jong-hwa] Starting today (the 2nd), a somewhat unfamiliar sponsor has appeared at the ‘KLPGA 2022 Lotte Open’ golf tournament held at Incheon Bears Best Cheongna GC. Among the 15 sponsors, in addition to Lotte Group affiliates such as Lotte Department Store and Lotte Construction, which have sponsored the tournament every year, and Incheon Metropolitan City, the furniture company Hanssem has appeared.

Hanssem has never sponsored a golf tournament before. At first glance, it seems unrelated.

Here is the reason. Last year, Hanssem was acquired by IMM Private Equity (PEF), a private equity fund operator. IMM PE acquired 37.8% (effective shares), including 15.45% held by Hanssem’s founder and largest shareholder, Honorary Chairman Cho Chang-gul, thereby taking over Hanssem’s management rights.

In September last year, Lotte Shopping appeared as a co-investment partner of IMM PE and invested 299.5 billion KRW in this PEF.

IMM PE has been seeking a strategic investor (SI) while signing a memorandum of understanding for share acquisition with Hanssem. Although IMM PE manages Hanssem’s operations, Lotte Shopping is a potential major shareholder with a preemptive purchase right for Hanssem. This means that when IMM PE puts Hanssem back on the market to recover its investment, Lotte Shopping has the right to purchase it first. Therefore, it would have been difficult to refuse Lotte’s offer to sponsor the golf tournament. For Hanssem, it is rather an opportunity to gain marketing effects. Corporate sports sponsorships are not something to be criticized.

However, the industry and securities circles do not view this favorably. After the ownership changed to IMM PE, they tightened their belts and cut costs such as marketing expenses, so there is skepticism about whether sponsoring a golf tournament makes sense.

Hanssem’s business performance in the first quarter showed sales of 525.9 billion KRW, down 4.9% year-on-year. Operating profit was 10 billion KRW, down 60.2%. During the peak of the COVID-19 crisis in 2020 and last year, operating profits were 93.1 billion KRW and 63.3 billion KRW, respectively. The outlook for the second quarter is also bleak. The stock price, which soared to 146,500 KRW per share in July last year, has recently been fluctuating between 60,000 and 70,000 KRW.

Since the IMM PE acquisition, the number of Hanssem employees has decreased by more than 10% in one year as younger employees have left the company. There is even talk that this is the biggest crisis since the internal sexual harassment incident in 2017.

Regarding this, a Hanssem official explained, "We are seeking to expand collaboration with Lotte Group, such as expanding Hanssem stores in large stores like Lotte Department Store, and this sponsorship is part of that policy. Please see it as participation to strengthen marketing and overcome difficulties."

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