Groups Reeling From Rapid M&A Growth

Several conglomerates that grew rapidly through M&As have begun selling off blue-chip affiliates and assets to resolve liquidity problems.

The Kumho Asiana Group said yesterday that it is considering selling Kumho Life Insurance outright to raise liquidity. It had planned to keep enough shares to maintain management control.

Since the group expects to secure less than it hoped for given the lackluster stock market, it is also considering selling all of its shares before listing and handing over management control.

Six group affiliates own 65.94 percent of Kumho Life Insurance, including Kumho Petrochemical and Asiana Airlines. The sale of all of the shares means selling Kumho Life Insurance outright. A group source said, “Selling Kumho Life Insurance is one of many options that can tackle liquidity problems. Nothing has been decided yet.”

The Dong-A Ilbo also broke the story of C&Group’s planned sale of its second shipyard, Shinwoo Shipbuilding & Offshore, in Geoje, South Gyeongsang Province. The conglomerate confirmed this measure yesterday.

“We decided to do so to focus more on C& Heavy Industries’ Mokpo shipyard as part of a self-rescue plan at the group level,” a C& source said.

C&, which started as Chilsan Shipping, rapidly grew in size through M&As to branch out into fashion, construction and shipbuilding, but liquidity problems due to the economic downturn has apparently forced it to sell the second shipyard.

Eugene Group, which deals in construction, finance, and retail, announced it will sell Eugene Investment & Securities (formerly Seoul Securities). Though the group said it is considering the sale of the brokerage to focus on competitive business lines, the business community believes Eugene is trying to alleviate rumors of a liquidity crisis that appeared after it acquired Hi-Mart.

The E-Land Group, once known for growing through frequent M&As, sold Homever to Samsung Tesco in May. E-Land had created Homever after acquiring Carrefour in April 2006.

The group had to resell the discount chain due to high interest after it borrowed more than one trillion won at the time of acquisition.

Cho Yong-joon, head of research at Shinyoung Securities, said, “For companies in financial trouble, selling sellable assets is the most realistic solution. Though painful, it is an inevitable option for them to raise financial soundness.”

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