E-Land Retail postpones IPO planE-Land Group has delayed the long-awaited listing of its retail arm, E-Land Retail, until next year as it seeks to improve its balance sheet and transform into a holding company structure.
E-Land Retail is one of the biggest IPOs awaited by investors this year. The company earned 5 trillion won ($4.5 billion) in revenue last year and operates 53 major shopping facilities nationwide, including Donga Department Store, NC Department Store and NewCore Outlet. The company expected its IPO procedures to be finalized by May.
A major drawback came last fall when E-Land Retail’s food business subsidiary E-Land Park, which is currently in the red, was revealed to have unlawfully withheld wages worth 8.4 billion won to part-time staff. The company runs 26 food chains, including the well-known buffet restaurant Ashley. In the aftermath of the controversy, Korea Exchange requested proof of having properly paid employees’ wages before any further proceedings.
“Hopefully, the diversion of E-Land Park from E-Land Retail will finalize between May and June,” said an E-Land Group spokesman. “We will submit once again for a preliminary evaluation this year and if everything goes smooth, E-Land Retail will be able to be enlisted by next year’s first half.”
Two core strategies were revealed for the grand plan in a press conference on Monday: The first is E-Land Group selling 600 billion won ($533.8 million) in shares in E-Land Retail to external investors such as private equities and securities. The second is removing the controversial E-Land Park, a food business division, from the retail arm that has kept the company from going public as initially planned in May.
“We have been making efforts to handle the wage crisis with sincerity, but nonetheless the IPO process kept on being delayed the company decided to make proactive changes in advance to improve our corporate value rather than just waiting for the next thing to happen,” E-Land Group CFO Lee Kyu-jin said at the press conference in the Kensington Hotel in Yeouido District, western Seoul.
The plan is a drastic measure for E-Land Retail, which has due dates for a redeemable convertible preferred stock worth 300 billion won arriving in June. Among the 600 billion won the group is to acquire through selling its retail subsidiary’s shares, 300 million won will go to pay back for this debt and 200 million will be used for the group’s de facto holding company E-Land World to acquire E-Land Park shares from E-Land Retail.
This will break the linkage of E-Land Retail to the payment controversy that’s been keeping it back from the screening process and improve the retail arm’s balance sheet as well, making it more likely for a successful IPO.
“E-Land Retail’s net profit last year is 130.2 billion won. This figure goes down to as low as 74.3 billion won in consolidated net profit which includes the balance sheet of its subsidiaries including E-Land Park,” said the company statement. “Once the two are separated, E-Land Retail’s corporate value will greatly improve.”
At large, E-Land generating capital through selling E-Land Retail shares is part of its grand plan to improve financial structure - de facto holding company E-Land World’s debt ratio soared to as high as 400 percent by 2015 to 2016. It later fell to 200 percent after selling assets and its brand Teenie Weenie to a Chinese company this year.
Another positive effect the measure will bring is that E-Land will be a step closer to firmly establishing a holding company structure. Until now, the food giant’s parent was E-Land Retail, which is a major subsidiary of E-Land World. The group’s vision is to simplify its organization structure by directly putting the food sector under its own wings.
Monday’s statement also said the plan is to establish the fashion business unit inside E-Land World to an independent company, strengthening E-Land World’s stance as a holding company with major subsidiaries of retail, food and fashion, instead of an operating entity.
BY SONG KYOUNG-SON [email@example.com]