[Reporter's Notebook] Lock&Lock deal stirs up controversy

The Korea Times

The Korea Times

Opinion

Tue, September 26, 2023 | 06:12

Reporter's Notebook

Reporter's NotebookLock&Lock deal stirs up controversy

Posted : 2017-08-27 16:32

Updated : 2017-08-27 17:20

Kim Jun-il, CEO of Lock&Lock / Korea Times file

By Park Jae-hyuk

Lock&Lock founder and CEO Kim Jun-il has come under fire over his recent decision to sell the 39-year-old Korean company to Affinity Equity Partners (AEP), one of Asia's largest private equity firms (PEF) based in Hong Kong.

The Seoul-based plastic container maker announced last Friday it signed a contract with the PEF to sell a 63.56 percent share held by the CEO and his family for 629.3 billion won ($558 million).

After the disposal, Kim sent an email to company employees explaining his decision.

"When our businesses in China were in crisis, I spent harder days than when I founded the company," he said. "Although we recovered our businesses there, I had to undergo a dangerous surgery for my cardiovascular disorder. Since then, I've tried not to disturb the company over my health."

Kim has also said he will not hand over Lock&Lock to his sons.

Most Korean news outlets have praised him for his decision, regarding the email as "a tearful farewell address."

Observers are split into two opposing camps.

Proponents praise his decision as a symbol of good corporate practices compared to many Korean chaebol groups, which have committed dubious acts for father-to-son ownership transfer.

Kim's two sons, who have worked for Lock&Lock as rank-and-file employees, are expected to leave the firm soon.

The CEO will also continue to take part in the company's management for a while, with a 6 percent share through re-investment.

By contrast, critics point out Kim is trying to dump his responsibility as an owner CEO at a time when the company faces a downfall, which might cause trouble for employees.

Although Kim said the deal guarantees their job security, Lock&Lock's 400 workers fear they will face restructuring by the global PEF, sooner or later.

Since 2014, Lock&Lock has suffered from declining sales in the Chinese market, the company's most lucrative market where the company has made almost half its sales.

It has taken blows from a few factors like the emergence of fake Lock&Lock products there, the slowdown of China's economic growth and President Xi Jinping's anticorruption drive.

Although Kim finished restructuring the China businesses last year, a political dispute between Seoul and Beijing over the U.S. anti-missile defense system has weighed on the company once again.

As it canceled a large-scale promotional event earlier this year, its sales and operating profit in the second-quarter respectively dropped 3.62 percent and 2.86 percent from the previous year. In particular, its sales in China dropped 19.1 percent during the same period.

Lock&Lock targets Southeast Asia as an alternative to China, but some observers say the former's plastic container market also nears the saturation mark.

"It is true small Korean companies have recently struggled due to fierce competition with foreign firms," a retail industry official said. "Despite such difficulties, employees may regard the founder's sudden divestment as irresponsible behavior."

pjh@koreatimes.co.kr