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Competition for the takeover of Jinro, the 81-year-old maker of soju or traditional Korean liquor, is heating up. Jinro is the largest company being put on sale in the domestic M&A market in the first half of this year. Keen interest is focused on it because the takeover could redraw the map of the industry with the stroke of a pen.
Jinro said Monday a total of 14 bidders, including Lotte Chilsung Beverage Co., Doosan Corp., Dongwon Group, Hite Brewery, CJ Group, Daesang Co., Muhak Co., and Taihan Wire, submitted formal letters of intent for the acquisition. Most bidders set up a consortium with domestic or foreign partners to tackle the takeover.
Jinro has 55 percent of the soju market, with W700 billion (about US$670 million) in sales and W200 billion (about US$190 million) in operating profit. The acquisition will cost more than W2 trillion. Estimates are that it will take five or even 10 years to recoup that investment.
The biggest merit of Jinro is that it has a large distribution network in Seoul and the metropolitan area, where it has a 92.7 percent market share. The liquor industry is more dependent on the distribution network than other industries. An industry official said the acquisition of Jinro, which has a strong brand power and a large distribution network, would produce synergy effects
Whoever takes over Jinro will become the next leader of the industry. If Hite with its 58 percent market share takes over Jinro, its rival Oriental Brewery (OB) will be in deep trouble. Hite overwhelms OB in South Gyeongsang Province where it has 90 percent market share. If Hite succeeds in taking over Jinro, it will become the market leader nationwide.
If Doosan takes over Jinro, the impact will also be significant. Doosan holds only a six percent share in the soju market, far behind Jinro.
But Jinro official Lee Kyu-cheol said that if a single company wins the acquisition, it will put a heavy burden on rivals.
Jinro has 60 overseas markets including the U.S. and Hong Kong. Jinro Japan has taken first place in the Japanese soju market for seven years since 1998, and some 50 Japanese liquor makers have failed to better Jinro, which earned W60 billion in sales in Japan last year. It earned W70 billion in sales in overseas market, 10 percent of its total sales, in 2004.
Industrial analysts say that Doosan, Lotte, CJ and Hite are the most promising bidders based on their strong financial capability. Jinro is resistant to the takeover by Doosan and Lotte because of fears over layoffs. More will be known once 45-day preliminary reviews are completed.
(englishnews@chosun.com )
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