Fashion OEM Hansae bids for GM Korea supplier Erae AMS

The holding company of Hansae Co., a leading global apparel original equipment manufacturer (OEM), is eyeing expansion into auto parts production by acquiring Erae AMS Co., a supplier to General Motors Co.’s Korean operation and Kia Corp.

Hansae Yes24 Holdings Co., Hyolim Industrial Co., Shinhwa Precision & Engineering Co. and Nara Gl Inc. were the four participants in a takeover bid on Monday led by lead manager Samhwa Accounting Corp., according to investment banking sources.

The four bidders are among the eight who submitted letters of intent (LOI) for the acquisition last month. Samhwa plans to conduct comprehensive evaluations on them and announce a preferred bidder on Aug. 23, sources added.

“Erae AMS’ parent Erae cs Co., which is under a reorganization process, is expected to accelerate normalization of its business operations if the deal is clinched,” an investment banking official said.

Market insiders said Hansae Yes24, the holding company of Hansae, clothing retailer Hansae MK Co., and online bookstore Yes24 Co., are likely to become the preferred bidder for Erae AMS.

Hansae Yes24 announced on Tuesday that it joined the bid to secure a new growth driver and to diversify its business. Details of the deal are yet to be confirmed.

Hansae counts global fashion brands such as Gap, H&M and Zara among some 30 global clients, for which the Korean company makes clothes under an OEM contract. Hansae’s revenue made up 62.7% of the holding company's 2.73 trillion won in 2023. 

The holding company, which exports clothes to several countries including the US and Canada, will leverage its global network to the auto parts business. 

Another bidder, Hyolim Industrial, manufactures auto parts such as knuckle and wheel carriers. Nara Gl is the parent of Nara Samyang, which produces geared motor and worm gear reducers. Transmission maker Shinhwa Precision & Engineering has joined forces with Seoul-based Keystone Private Equity for the bid.

Erae cs, which began a reorganization process in April, has put an 80.6% stake in Erae AMS and a 30% stake in Estra Automotive System Co. for some 100 billion won to repay debt worth 163 billion won.

Erae AMS and Estra were formerly Delphi Automotive Systems, which was spun off from General Motors in 1999. Erae cs acquired a 42.3% stake in Delphi’s Korean affiliate for 190 billion won in 2011 and an additional 50% stake for 100 billion won in 2015, and then split the company into Erae AMS and Estra Automotive.

Erae AMS supplies GM Korea Co with drive systems, infotainment and autonomous driving solutions. In April, the car parts maker signed a contract with Kia to supply military vehicle components worth 18.5 billion won for five years.

Erae AMS posted 10.9 billion won in operating profit last year, nearly double its surplus in 2022. Its revenue rose 7.3% on-year to reach 576.6 billion won last year.

Write to Jong-Kwan Park at pjk@hankyung.com
Jihyun Kim edited this article.