CJ gears up for M&A bonanza
[THE INVESTOR] Three key subsidiaries of Korean conglomerate CJ Group -- CJ CheilJedang, CJ Logistics and CJ ENM -- are seeking to aggressively pursue merger and acquisition deals overseas in the second half of this year, according to industry sources on Aug. 6.
The group’s latest strategy is part of its “Great CJ” vision, which was first unveiled in 2010. The long-term blueprint aims to pull sales up to 100 trillion won (US$88.65 billion) with operating profit of around 10 trillion won by 2020.
The conglomerate has confirmed that it is eyeing global firms but declined to give specific details about deals being pursued by its subsidiaries, saying “nothing has been decided yet.”
Over the last five years, CJ has signed quite a few global M&A deals, with the biggest one amounting to 360 billion won between food giant CJ CheilJedang and Brazil-based firm Selecta in 2016. Below are other chunky deals and the group’s future plans.
Tie-up with Schwan’s helps Bibigo expand in US
US food processor Schwan’s, with a projected valuation of around 2 trillion won to 3 trillion won, is the biggest company that CJ is eyeing.
Schwan’s is one of the largest food companies in the US and is the No. 2 player in the frozen pizza market with sales reaching around 3.3 trillion won last year. Since CJ also has a frozen dumpling brand Bibigo, the US-based firm is expected to produce powerful synergies and help it expand its presence further in the US.
CJ is not trying to secure the entire stake. The Korean conglomerate secured about 1.3 trillion won and has formed a consortium with Korean private equity firm JKL Partners to fund the remaining amount for acquiring Schwan’s, sources said.
Moreover, by forming a consortium CJ expects to get some know-how about signing a big acquisition deal with a foreign company from the PEF, which worked as an M&A consultant for Korean livestock and animal feed maker Harim Group when it signed a deal worth 140 billion won with US company Allen Family Foods.
Potential partnership with Germany’s Schnellecke
German company Schnellecke confirmed with The Investor that CJ Logistics is one of the firms that approached it for a strategic partnership or investment, adding that talks are still in the preliminary stage, with no concrete agreement or decision in sight.
Industry sources project Schnellecke to be worth around 1 trillion won, which is bigger than what CJ spent to acquire CJ Logistics -- just over 843.6 billion won.
“We are trying to expand our presence overseas through a two-track method. One is by directly entering the market and the other is through acquiring a foreign company,” a CJ Logistics spokesperson said.
Over the last five years, the company been focusing on expansion in Asia. However, there was a slight change in plans with CJ Logistics acquiring 90 percent stake in US-based logistics firm DSC Logistics for 231.4 billion won.
Despite the deal size, industry watchers say that to expand into the already saturated US and European markets it is crucial for CJ to acquire established companies. In addition, Schnellecke’s operations in 31 countries, including Russia, India, Mexico and Brazil, also make it an attractive target for acquisition.
CJ heiress wades into the waters
CJ ENM is also looking to strike a smaller but equally significant deal. The Korean entertainment giant recently conducted due diligence of Slovenia-based e-commerce firm Studio Moderna, which is valued at around 300 billion won to 400 billion won.
Established in 1992, Studio Moderna is growing fast with sales in 2016 reportedly reaching 50 million euros (US$57.78 million), which increased 18 percent on-year.
According to sources, despite its small size, the deal is still considered crucial and is most likely to be successful, because CJ Chairman Lee Jae-hyun’s eldest daughter Lee Kyung-hu is currently in charge of it. This deal will reflect her management skills and might also be a crucial factor when the next leader of CJ ENM is chosen.
By Song Seung-hyun (firstname.lastname@example.org)