Can IMM restore Hanssem's No. 1 status after headquarters sale?

Hanssem headquarters in Sangam-dong in Seoul / Courtesy of Hanssem

Attention is focused on whether IMM Private Equity, which holds the management rights for Hanssem, a Korean home appliances and furniture company, can restore it to a leading position in the industry. After Hanssem relinquished its top spot to Hyundai Livart for the first time ever in the first quarter of this year, IMM took the drastic step of selling Hanssem’s company building instead of opting for an exit.

On Aug. 30, Hanssem’s board of directors approved a plan to sell Hanssem’s headquarters located in Sangam-dong in Seoul to Gravity Asset Management for 320 billion won ($240 million). This amount represents a substantial 30 percent of Hanssem’s total assets as of the end of last year.

The furniture brand received the sale proceeds from Gravity Asset Management on Tuesday, though it plans to continue utilizing the current building through a sale and leaseback arrangement.

The home furnishing firm purchased its current headquarters for 148.5 billion won in 2017, resulting in more than double the profit after just seven years.

IMM, which led the sale, jointly acquired a 27.7 percent stake in Hanssem with Lotte Shopping for 1.45 trillion won in 2021, becoming the largest combined shareholder.

The private equity firm paid about 222,550 won per share, which was more than double Hanssem’s stock price at the time, as it included a management rights premium.

However, with the real estate market downturn, Hanssem’s performance began to decline. In 2022, its revenue was limited to 2 trillion won and recorded an operating loss of 20 billion won for the first time.

Hanssem CEO and IMM Private Equity Partner Eugene Kim / Courtesy of IMM Private Equity

In response, IMM appointed its partner and head of operations Eugene Kim as CEO of Hanssem. Since then, the firm has successfully returned to profitability in 2023, although its revenue decreased to approximately 1.9 trillion won.

In the first quarter of this year, Hanssem reported sales of 485.9 billion won, losing its number one position for the first time to Hyundai Livart, which achieved over 500 billion won in sales.

According to investment banking industry officials, the sale of Hanssem’s headquarters has enabled the company to gain time to make a comeback, as IMM has obtained a waiver for financial covenants from the senior lenders involved in the acquisition financing of Hanssem.

The lenders reportedly agreed to the waiver, considering the improvement in Hanssem’s financial situation due to the sale of its headquarters, as well as the recent performance and potential for future performance improvements.

A Hanssem official said, “While no specific plans have been established for the use of the 320 billion won we secured this time, the intention is to secure future resources for the company’s development, including enhancing corporate value.”