A new owner has finally been found for The Korea Herald - Naeway Economic Daily, the publishing company that owns Korea's leading English language newspaper and its only evening business newspaper.
IKR Kalia, an investment holding company has agreed to pay Wn4.8 billion ($3.9 million) for a 50% stake in the company as well as assuming Wn37.7 billion in debt. The total transaction value is Wn45.3 billion. According to a company release, The Korea Herald - Naeway Economic Daily had assets in 2001 of Wn54.5 billion. Thus the valuation that Kalia is paying for its stake works out at 17.6% of the asset value.
That this looks cheap is not surprising. The publishing assets have been losing money for years, culminating in a loss of Wn7.9 billion last year. This history of losses can be attributed to the rather tortured ownership saga surrounding the company in recent years.
The Korean Republic was founded by Daehan Public Opinion Corp in 1953 and changed its name to The Korean Herald in 1965. The Korea International Trade Association founded the Ilgan Naeway Kyungje in 1973 and merged it with The Korea Herald in 1978.
In 1989 Dainong Corp bought control with a 49.97% stake. In 1997 that stake was bought by Shindongbang Corporation, a soya bean food processing and manufacturing company. Shindongbang went bust in 1999 and as it had used its stake in the Korea Herald for collateral for its loan with Daehan Investment Bank, ownership passed to Daehan.
Unfortunately Daehan itself quickly went bust as well. And since 1999, the search has been on for a new owner. In December 2001 Cho Sung-hyo was selected as a preferred bidder after an auction for the company. Yet that came to naught and his status was terminated in August 2002. Since then IKR Kalia has been the only bidder and the deal was agreed yesterday.
IKR Kalia itself is an interesting company. It is an investment holding company founded by Jungwook Hong, who is the 30-year old son of Hong Kyung Il, a Korean movie heart throb of the 1960s and 1970s. On top of the natural advantages of being a movie star's son, Hong has an impeccable resume.
He got his bachelor degree from Harvard, an MA from Peking University and his doctorate of law from Stamford. He has worked as an M&A banker with Lehman Bothers in the New York and worked as an attorney at the SEC in the US. His only connection with publishing is a holiday job as a proofreader at The Korea Herald when he was 16.
It is unclear at this stage what his plans are for transforming the publishing company. But what makes this story so interesting is that it encapsulates so much of what has happened in Korean business over the past few years. It has an over-stretched conglomerate getting into non core business and then going bust. It involves a bail out by a troubled financial buyer that then gets into similar straights. And finally the company is purchased by a returning Korean, educated abroad and ambitious to take part in the growth of the new Korea.
Finally, if anyone doubts that Hong doesn't have the nerve for a fight in the competitive world of publishing, be warned: he spent the first six months of this year doing his national service in the Korean army.
