Visteon confirms PE talks over Korea divestment

Visteon, which owns 70% of locally-listed HVCC, noted in a regulatory filing that there is no guarantee the talks will result in a transaction. Local media earlier reported that Hahn & Co. had reached a preliminary agreement to buy Visteon's interest in HVCC for about KRW4 trillion ($3.6 billion). Based on this figure, even with substantial debt financing, the PE firm would still require co-investors.

As of early afternoon trading on November 27, the stock was down 4.55% at KRW39,000, valuing the Visteon holding at around KRW3.01 trillion.

HVCC is the world's second largest provider of vehicle thermal management solutions. It produces air-conditioning systems for the interior of vehicles, thermal management systems that extract and re-use heat produced by engines, and cooling solutions for electric-powered and hybrid vehicles.

HVCC was formed in 1986 as a joint venture between Mando Machinery Corporation - a subsidiary of car parts maker Mando Corp, which was in turn controlled by domestic conglomerate Halla Group - and Ford Motor Company. It was known as Halla Climate Control.

Halla Group collapsed during the Asian financial crisis of 1997 and then Visteon acquired Ford's majority interest in the joint venture in 1999. Various other parts of Halla Group were carved up among private equity investors, including Mando Corp. itself. A Halla-led consortium bought back the business in 2008. The group has previously expressed an interest in acquiring HVCC.

In 2012, Visteon launched a tender offer to take full ownership of HVCC but was unable to win minority shareholders' support. Korea's National Pension Service is among the largest of these minority shareholders. Visteon is said to have considered divesting at least part of its stake several times over the last two years.

HVCC reported net income of KRW312 billion in 2013, up 27.3% year-on-year. Sales revenue rose 42.1% to KRW5.2 trillion over the same period. Korea accounts for 34% of sales, down from 48% in 2012. Hyundai Motor Group is the single largest customer, representing 51% of sales, followed by Ford on 25%.

Hahn & Co - which was founded by Scott Hahn, formerly CIO of Morgan Stanley Private Equity Asia - reached a first close on its second fund of $900 million in October. A final close at the hard cap of $1.2 billion is expected by December.

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• Topics
• Buyouts
• North Asia
• Industrials
• South Korea
• buyout
• Hahn & Co
• manufacturing