Hahn & Co moves towards control of Korea's Ssangyong Cement
Korean GP Hahn & Company will assume majority control of Ssangyong Cement with the acquisition of a stake held by Japan-listed Taiheiyo Cement for KRW454.8 billion ($394 million).
According to a Taiheiyo filing, Hahn & Co. will buy 25.9 million shares in Ssangyong, amounting to a 32.4% stake - 27.49% from Pacific Ocean Cement and 4.87% from TCC Holdings. As a result, the private equity firm's interest in Ssangyong will rise from 46.8% to 79.2%.
Hahn & Co. was selected by creditors as the preferred bidder for a 36.8% stake in Ssangyong - it bought a 10% interest for KRW46.3 billion in 2012 - at the end of last year. Taiheiyo's involvement was a potential sticking point as the company previously claimed it had first option on that share sale and threatened legal action to block Hahn & Co's purchase.
Ssangyong Group has been in difficulty since 2013 when its subsidiary, Ssangyong Engineering & Construction, filed for a debt workout program. The cement business remains solvent, generating KRW2.01 trillion in sales for the 2016 financial year, a slight increase on the previous 12 months. Net income fell 25.2% year-on-year to KRW77.1 billion.
Hahn & Co. wants to consolidate the Korean cement industry, which has seen numerous asset sales by conglomerates in response to the construction industry downturn. It acquired Daehan Cement, a subsidiary of conglomerate Daehan Group, out of bankruptcy in 2012, paying $65 million, and then took over Gwangyang Cement from Eugene Corp. at a cost of KRW85.5 billion. Hahn & Co. also owns Posfine, a slag powder producer acquired from steelmaker Posco at the end of 2014.
Another distressed sale in the last year saw KDB Private Equity and Sampyo Cement Corporation acquire a 54.96% stake in Tongyang Cement & Energy Corporation from bankrupt Tongyang Group for $595 million. Baring Private Equity Asia also agreed to buy LafargeHolcim's Korea-based cement business - which is not in difficulty - in a joint deal with local GP Glenwood Private Equity worth approximately KRW560 million ($482 million).
Hahn & Co. is currently investing its second Korea buyout fund, which closed in late 2014 at the hard cap of $1.2 billion.
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