Seoul-based private equity firm STIC Investments has agreed to acquire world-leading luxury vinyl tile (LVT) flooring maker Nox Corp. for 450 billion won ($336 million) from U.S. alternative investment manager TPG Inc.

STIC signed a share purchase agreement (SPA) on Aug. 16 to acquire a 65 percent stake in South Korea’s Moleem Corp., Nox’s parent company, from TPG, according to investment banking industry sources in Seoul. The South Korean private equity firm, which was selected as the preferred bidder in April, plans to raise the money for the deal through a fund valued at around 2 trillion won set up last year.

Moleem’s total stake is estimated at just over 700 billion won, the sources said.

TPG bought the 65 percent in December 2017 for 360 billion won and wanted to sell the shares with a company valuation of 1 trillion won in 2023. But the attempt failed, and the private equity firm based in Fort Worth, Texas, tried again this year to sell the stake.

STIC will also provide TPG with acquisition financing for the share purchase on similar terms. The US company has borrowed 250 billion won in the form of loans with an interest rate of 3-4% per annum from South Korea’s Hana Bank and Hana Securities Co.

These lenders agreed to the takeover because it would be advantageous to maintain the loans even though their interest rates are lower than current borrowing costs, the sources said.

CEO RETAINS SHARE AND POSITION

Moleem founder and CEO Koh Dong-hwan, also known as Dan DH Koh, decided to keep his remaining 35 percent stake and plans to invest in a special purpose company (SPC) to acquire STIC.

Investment banking industry sources said Koh may demand a premium on a future sale of STIC’s majority stake rather than making an immediate profit.

He will retain his position and lead the company, its global operations and potential acquisitions of smaller competitors.

“Koh, the leader of Nox’s success story, is willing to retain the position of CEO and continue the partnership with STIC,” the private equity firm said.

GLOBAL BUSINESS

Founded in 1994, Nox reported an operating profit of 31 billion won on sales of 259.1 billion won last year. The company generated 90% of its total sales from overseas markets, particularly the United States and Europe.

Nox is the world’s largest supplier in the commercial LVT industry with a market share of around 20%.

The global LVT sector is forecast to grow at an average annual rate of 12% through 2028 as tiles rapidly replace existing flooring options such as carpet and wood due to their superior quality, durability and lower cost.

Luxury hotels that had already installed carpets increased their use of LVT as COVID-19 increased hygiene awareness. LVT was installed in the lounge at Paris’ Charles de Gaulle airport and in Hermès boutiques in the French capital.

Nox faced growing competition from Chinese rivals who sell their products at prices 20 percent lower than the South Korean company.

STIC plans for Nox to focus on premium product lines and make the Ho Chi Minh City plant the main production site to increase price competitiveness with low labor costs.

The company’s South Korean plant will focus on producing various models in small quantities, while the U.S. plant in Ohio is likely to benefit from Washington’s efforts to relocate.

Write to Ji-Eun Ha at [email protected]

Jongwoo Cheon edited this article.