Hoban Construction has diversified its business portfolio to leisure and distribution industries by participating in a wide range of mergers and acquisitions (M&A) deals, in an effort to reduce its reliance upon the sluggish housing construction business.
Founded in 1989 in Jeolla Province, Hoban Construction has traditionally built up its business by supplying houses – mostly in rural areas – and became the 10th largest construction company in 2019. However, the firm began to expand its scope about a decade ago, when it first became active in the M&A market.
Hoban Construction acquired Sky Valley Country Club in the early 2000s and Waikele CC in Hawaii in 2010, then expanded its construction business by buying Woobang Engineering & Construction in 2015 and Ultra Construction & Engineering in 2016.
With housing construction booming at the time, its operating profit grew from about 100 billion won ($90 million) in the mid-2010s to more than 200 billion won in 2019. The firm’s cash and cash equivalents increased from 500 billion won in 2016 to 950 billion won in 2019 thanks to its stable financial performance and cash equivalents increased even more after it merged with Hoban Corp in 2018.
However, the housing construction business has since slowed, and Hoban Construction invested the money in distribution and leisure companies in an attempt to diversify its business and secure a new growth engine. The firm acquired Resom Resort for 250 billion won in 2018, changing its name to Hoban Hotel & Resort, and bought H1 Club and SeoSeoul Country Club in 2019.
Hoban Property has been used for the expansion into the distribution industry. The affiliate acquired a 51% stake in Daeah Vegetable & Fruit Distribution for 28.8 billion won and bought a 43% stake in Samsung Gold Exchange for around 22.3 billion won in 2019. Kim Yoon-hye, the eldest daughter of Hoban Construction chairman Kim Sang-yeol, is the largest shareholder of Hoban Property with a 30.97% stake.
These companies are expected to become cash cows, with Samsung Gold Exchange and Daeah Vegetable & Fruit Distribution recording revenues of 1 trillion won and 20 billion won respectively in 2019.
Hoban Construction launched a startup accelerator named Plan H Ventures, led by Kim Dae-hun, the eldest son of chairman Kim, which is investing in promising startups that can directly help the construction business or help it create new synergies.
Industry watchers expect Hoban Construction to continue pursuing its strategy of business expansion through M&A deals.
“Hoban Construction seems to take over companies that could create synergies with its existing businesses instead of carrying out big ticket deals which could put a burden on the company,” said an industry source.
“It will overcome the limits of the housing construction market by gradually altering its trajectory.” (Reporting by Jung-whan Lee)