Hahn & Co-backed Cowell e Holdings targets $153m offering

The company - a major supplier of camera modules used in Apple devices - will sell 208 million shares at HK$4.00-5.75 apiece, according to a regulatory filing. The offering comprises 62.4 million new shares and 124.8 million shares held by Hahn & Co, which puts the private equity firm in line for proceeds of HK$499.2-717.6 million.

Should the overallotment option be exercised, Hahn & Co. could sell up to 156 million shares in total, swelling the offering to HK$1.26 billion.

Following the IPO, the private equity firm will hold a 29.99% interest in Cowell e Holdings, while Joung Hwan Kwak, the company chairman, would see his stake diluted to 45%. Each party currently owns 50% of the business.

This was the first deal from the private equity firm's debut fund, which closed at $750 million in 2011, one year after CEO Scott Hahn left his previous role as CIO at Morgan Stanley Private Equity Asia. The Cowell deal was unusual in that it was structured as a tender offer for a listed company.

Hahn & Co teamed up with Kwak, who already held a 66.5% stake in the business, and submitted a privatization offer in August 2011. Their bid of KRW4,300 per share valued Cowell at approximately KRW129 billion ($114 million). The process was completed in May 2012.

The PE firm committed KRW86.2 billion to the deal - KRW42.9 billion through the tender offer and KRW43.3 billion paid to Kwak for the shares needed to balance ownership of the company at 50% apiece.

Cowell manufactures camera modules used in smart phones, multimedia tablets and other mobile devices. According to IBS, the company's global market share in 2013 was 5%, making it the sixth-largest supplier. The market saw shipments of 3.8 billion units, worth $16.4 billion, in 2013 and this is expected to reach 7.3 billion units, or $34.4 billion, by 2020.

Apple has been a Cowell customer since 2009 and was directly or indirectly responsible for around 85.8% of company turnover in 2013. This share was expected to fall to around 80% in 2014. The company's five largest customers together account for more than 99% of turnover, with other major partners including LG Electronics, Hitachi and Samsung Electronics.

Turnover came to $813.9 million in 2013, up from $527.5 million the previous year, and then $279 million in the first half of 2014. The company saw net profit rise from $13.2 million in 2012 to $50.2 million in 2013. This was followed by $9.7 million in the first six months of 2014.

Morgan Stanley is serving as sole sponsor for the offering.

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