Hahn & Co leads $3.6b acquisition of Visteon’s Korean unit

Visteon confirmed in late November that discussions were underway following reports of a preliminary agreement being struck. Hankook, the world's seventh-largest tire maker, said earlier this week that it may participate in the deal. It has also been reported that the company will have first refusal on the asset when Hahn & Co. decides to exit its stake.

The buyers are paying KRW52,000 per share for HVCC - the stock is currently trading at around KRW47,500 - which represents an enterprise value of approximately 10.1x EBITDA for the year ended September 2014. The transaction is scheduled for completion in the first half of 2015.

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. It has 36 manufacturing sites and four technical centers across 19 countries and employs 15,500 people.

Visteon said the divestment would allow it to concentrate on cockpit electronics and cloud-based products and services.

"Customers of HVCC will continue to benefit from its globally renowned technology solutions, highly respected management team, strong balance sheet, dedication to innovation and expanding global market presence," Scott Hahn, CEO of Hahn & Co, said in a statement. "In partnership with Hankook Tire, we believe we can help HVCC expand its customer base and global reach and further improve upon HVCC's operating efficiency and technological expertise."

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 ($283 million) 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 is expected at the hard cap of $1.2 billion.

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