Hahn & Co, Ssangyong Cement bid for Hyundai Cement

Ssangyong Cement said in a filing that it had formed a consortium with Hahn & Co. and submitted a preliminary proposal regarding Hyundai Cement. According to local media, the price for the asset - the seventh-largest player in the domestic cement industry - could reach as high as KRW600 billion ($507 million), with numerous strategic and financial investors expected to bid.

Hyundai Cement was spun off from Hyundai Engineering & Construction in 1969 and became an affiliate of Sungwoo Group. Its troubles date back to a sharp downturn in the construction sector following the global financial crisis. The company has been under a workout program since 2010 and the creditors - led by majority shareholder Korea Development Bank - were expected to force a sale at some point.

Sales reached KRW187.1 billion in the first six months of 2016 while the company posted a net loss for the same period of KRW285.9 billion. For 2015 in full, sales came to KRW363.2 billion and the net loss was KRW24.9 billion, compared to sales of KRW315.7 billion and a net profit of KRW271.9 billion in 2014.

Hahn & Co. bought a 10% stake in Ssangyong Cement in 2012 and was then selected by creditors as the preferred bidder for an additional 36.8% interest in January 2016. Six months later, the GP agreed to buy a further 32.44% from Japan-listed Taiheiyo Cement. The latter two transactions have a combined value of around KRW1.15 trillion ($953 million).

The cement business is the clear market leader in Korea and remains solvent, generating KRW2.09 in sales and KRW77.1 billion in net income last year. However, parent company Ssangyong Group has difficulties elsewhere in its organization, with subsidiary Ssangyong Engineering & Construction filing for a debt workout program in 2013.

Hahn & Co. previously 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. It also owns Posfine, a slag powder producer acquired from steelmaker Posco at the end of 2014.

There have been numerous other sales in the industry as conglomerates attempt to resolve financial difficulties arising from their construction sector interests. Last year, KDB Private Equity and Sampyo Cement Corporation acquired 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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• Topics
• North Asia
• Industrials
• Buyouts
• South Korea
• manufacturing
• Hahn & Co