MSPEA in $293m Korea construction materials carve-out
Morgan Stanley Private Equity Asia (MSPEA) has acquired a construction materials business from a subsidiary of South Korean conglomerate Hanwha Group in a deal worth KRW300 billion ($293.4 million), including debt.
The PE firm's contribution is around KRW141.3 billion. Yonhap News Agency reported the transaction and sources close to MSPEA confirmed the details to AVCJ.
Hanwha L&C produces advanced materials typically used by the auto, electronics and solar power industries, as well as construction materials. The decision to split the business allows Hanwha L&C to focus on its core operations and also pay down debt. The company's debt ratio will decrease from 180% to 110% post-transaction.
In this respect, the deal is part of a broader trend whereby Korean conglomerates, either in distress or under political pressure, are divesting non-core assets. Similar transactions include MBK Partners' acquisition of water purifier business Woongjin Coway from Woongjin Group and Affinity Equity Partners' purchase of a controlling stake in digital music platform Loen Entertainment from SK Telecom.
MSPEA's previous Korea deal - the acquisition of Ssangyong C&B and Monalisa last year - fell in line with another buyout trend: succession planning, whereby the owner was considering retirement but had no natural heir.
In the case of Hanwha L&C, MSPEA offered guarantees to the 600-strong workforce of job security, adequate working conditions and welfare benefits over the next five years. The construction materials unit is set to spin-out from its parent by July 1 and come under private equity ownership by the end of the month.
The unit produces PVC windows and doors, flooring materials, decorative films and sheets, and engineered stone surfaces. Last year it recorded revenue of KRW719.8 billion and an operating profit of KRW22.2 billion.
Founded in 1952, Hanwha Group has assets spanning manufacturing and construction, finance, services and leisure, solar and sustainability. It is one of Korea's 10 largest business groups, with $117 billion in assets and total sales of $35.1 billion in 2013.
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