Hahn & Co buys Korea's SK Shipping for $3.7b
Hahn & Company has completed what is described as one of the first successful non-government led corporate restructurings in Korea’s shipping industry with the $3.7 billion acquisition of SK Shipping.
The private equity firm will take an approximately 79% stake in SK Shipping through an equity and convertible bond offering, with current majority shareholder SK Holdings retaining 21%. The transaction includes the assumption of debt and a new capital injection of around $1.4 billion. All the proceeds will be used to pay down SK Shipping's debt, lowering the company's gearing ratio from 2,400% to 300%.
Hahn & Co. is committing $1 billion in equity to the deal, utilizing capital it has already raised, according to a source familiar with the deal. The firm is said to be in the process of raising its third fund, which has a hard cap of $2.25 billion and includes a $650 million sidecar.
SK Shipping operates 92 vessels and generates around $1.5 billion in annual revenue. The company has struggled amidst a prolonged slump in the global shipping industry, which has caused considerable distress among Korean carriers and shipbuilders. Korea Line filed for bankruptcy in 2011, while STX Pan Ocean and Hanjin Shipping followed suit in 2013 and 2017, respectively. There has also been a concerted government effort to rescue Daewoo Shipbuilding & Marine Engineering.
SK Shipping will continue to use the SK brand and provide services to affiliates of SK Group, which is Korea's third-largest conglomerate with assets spanning energy, telecommunications, and semiconductors. Hahn & Co. plans to pursue growth in SK Shipping's core business areas of wet tanker and liquefied natural gas (LNG) shipping.
The private equity firm has looked at various shipping assets over the years and came close to buying Korea Line. It eventually carved out Hanjin's bulk commodity assets as H-Line Shipping in 2014 through a KRW1.6 billion ($1.4 billion) deal, including equity and debt. The company, which specializes in iron ore, coal, and LNG freight services, has seen revenue jumped from $400 million to $700 million since the acquisition, while margins have reached nearly 40%.
Given H-Line focuses on dry bulk while SK Shipping is primarily involved in wet bulk services, there are no plans to merge the two companies.
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