Hahn & Co closes Fund II at $1.2b, raises $700m co-invest vehicle

The private equity firm launched Fund II in the middle of July. By the time of the first close in mid-October the $900 million target for the entire vehicle had been reached. The final close came in the first week of December. Existing investors account for most of the corpus, although there were some new entrants, allowing for a more geographically diversified LP base than for Fund I.

The process was complicated by HVCC deal, which became available after the launch of Fund II. Hahn & Co. and Hankook Tire, the world's seventh-largest tire maker, have agreed to buy a 70% stake in HVCC from US auto parts maker Visteon Corp. The private equity firm's individual contribution is around $2.6 billion.

It is by some distance the largest transaction Hahn & Co. has attempted and the ticket size was well beyond the capacity of the firm's first fund. LPs participating in Fund II were therefore invited to participate in a dedicated co-investment vehicle. Korea's National Pension Service is also understood to be involved.

"People are now trying to get increasingly custom-tailored fund products with different economics and fund life. There is going to be more creativity in terms of fund structure and design," Scott Hahn (pictured), CEO of Hahn & Co, said of the decision to raise a co-investment vehicle alongside the main co-mingled fund.

Hahn founded the firm after departing Morgan Stanley Private Equity Asia in 2010, where he served as CIO. Fund I closed at $750 million in August 2011, bettering the $600 million target. The anchor investors in the vehicle are said to be Temasek Holdings and Asia Alternatives Management.

The first fund is now fully deployed or fully spoken for and nearing two liquidity events. Cowell e-Holdings, a supplier of mobile devices and optical parts, has filed for a Hong Kong IPO and is expected to list in the first half of 2015. A sale process for Ssangyong Cement, in which Hahn & Co. is a co-investor alongside Korea Development Bank, Seoul Guarantee Insurance and Shinhan Bank, is ongoing.

The private equity firm has also completed several bolt-on transactions in the past year. On December 30, Hahn & Co. signed off on the acquisition of Posfine, a slag powder business owned by steelmaker Posco. The asset will be consolidated with the investor's other cement businesses.

Meanwhile, efforts have been made to expand the product portfolio of Woongjin Foods, in which Hahn & Co. acquired a majority stake in 2013 for $190 million through a court receivership auction. Additions include juice maker Dongbu Farm Gaya and chewing gum and confectionary manufacturer Daeyoung Foods.

According to AVCJ Research, private equity investment in South Korea reached a record $10.8 billion in 2014, with buyouts accounting for $7.7 billion of the total. The country's share of Asia-wide buyouts came to 26.7%, compared to 17.2% in 2013 and 9.9% in 2012.

The Carlyle Group's $1.93 billion acquisition of Tyco International's South Korean business was a substantial contributor to the 2014 figure, alongside HVCC. However, Hahn believes that international PE firms are losing ground to local players such as MBK Partners, Vogo Investment, IMM Private Equity and Hahn & Co.

"M&A activity in Korea is picking up but the foreign private equity share continues to go down," he said. "The market is significantly skewed towards the local private equity players because there is a lot of capital available in Korea, more experience among the local managers, and in many cases they are the preferred buyers for businesses."

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• Topics
• Fundraising
• Buyout
• North Asia
• Hahn & Co
• Fundraising
• South Korea
• buyout