Hahn & Co's K Car raises $285m in Korean IPO

Approximately 13.5 million shares were sold for KRW25,000 apiece, according to a filing. Hahn & Co. offloaded 12.3 million shares for a KRW306.5 billion partial exit, reducing its holding from 100% to 72%. K Car dropped 8% on its trading debut on October 13 and remains below the IPO price, closing at KRW24,700 on October 15.

The company has a market capitalization of KRW1.19 trillion, which means Hahn & Co’s remaining interest is worth around KRW855.2 billion.

The GP carved out SK Encar, Korea’s largest used-car retailer, from SK Group for $140 million in equity in April 2018. It picked up Joy Rent a Car from CJ Group a couple of months later for $70 million. The goal was always to create a broader automotive marketplace with a financing element. Used car retailers are not allowed to operate financing entities, so Joy Rent a Car served that purpose.

“While we like the car rental market in Korea, we bought Joy Rent a Car as a platform to launch to new businesses, which we will support with a large capital injection into the company,” Scott Hahn, CEO of Hahn & Co, told AVCJ in 2018.

“One new area of opprobrium is re-rentals. In Korea, rental agreements are usually 2-3 years, but a car can be rented for longer than that. We want to take a car that was previously new and rented and open a new market where you can cost-effectively do a re-rental into later years. The other business is used car financing, which has very low penetration in Korea.”

More than 70% of new cars sold in Korea have some form of lease financing, but this applies to just 40% of used vehicles. The equivalent figures in the US market are 85% and 55%. At the time of acquisition, fewer than 20% of vehicles sold by SK Encar had financing. Meanwhile, long-term rentals are increasingly preferred to lease agreements because maintenance is covered by the provider.

K Car’s used car sales network comprises 41 showrooms and one auction house as well as an online presence. The company sold 90,149 unts in 2020, with e-commerce accounting for 35%. This compares to 84,328 and 27% in 2019. Total used car sales came to KRW38.7 trillion, including KRW586.9 billion through online channels. K Car’s share was 3.42% and 78.95%, respectively.

The merger with Joy Rent a Car brought 10 branches and a fleet of about 5,400 vehicles. The company offers long-term B2C rentals and short-term rentals to business customers. Long-term contracts contribute about three-quarters of car rental revenue.

K Car posted KRW1.32 trillion in revenue for 2020, up from KRW1.19 trillion a year earlier. Over the same period, net income rose from KRW14.8 billion to KRW24.1 billion. In the first half of 2021, revenue and net income were KRW910.6 billion and KRW26.5 billion, the prospectus states.

Korea’s used car market has grown from KRW32.1 trillion in 2015 to KRW38.7 trillion in 2020 and Frost & Sullivan expects it to be worth KRW49.7 trillion by 2025.

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• Topics
• North Asia
• IPO
• Consumer
• South Korea
• Hahn & Co
• automobiles