Hahn & Co. buys Korean cement firm out of bankruptcy

It is unusual, however, for private equity firms to buy these assets via the courts. Hahn & Co. did just that in acquiring Daehan Cement.

The unit's parent company, Daehan Group, made a name for itself in logistics and subsequently expanded into other areas. Like a number of other mid-size chaebols, Daehan overreached and the cement business went into insolvency. Hahn & Co. fought off competition from four small strategic investors to acquire the asset for $65 million in a 100% equity deal.

"Court sales processes are difficult," says Scott Hahn, president of Hahn & Co. "It is very local - you have to go to a provincial court and hand in your application - and then you have to display a clear understanding of the industry. This sort of transaction isn't really for foreign private equity firms."

The Hahn & Co. team, which spun out from Morgan Stanley Private Equity (MSPE) Asia in 2010, has previous experience of the cement business. During the 2000s, MSPE Asia bought and then sold a controlling stake in Ssangyong Corp, a trading firm with eight subsidiaries, including Ssangyong Cement Industrial. It was another case of a chaebol jettisoning assets due to financial problems.

Hahn & Co. plans to make improvements to Daehan Cement's sales network, strategy and management structure, but a positive outlook on the industry as a whole was the decisive factor in the acquisition. "Korea has a pretty high consumption of cement and it has not gone down that much in terms of demand," Hahn says. "It helps that there was never a big housing bubble here and, although the market has slowed down, we think it is stabilizing and prices are now going up a bit."

This is Hahn & Co's third investment from its $750 million buyout fund, which closed last year, and the second in the past few weeks. The private equity firm also bought a 66% controlling stake in Coadis, a Korean auto parts manufacturer that is a global supplier to General Motors, among others. The family owners recognized that they needed external capital and management expertise to expand the business.

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• Topics
• North Asia
• Buyouts
• Industrials
• Scott Sang-won Hahn
• buyout
• South Korea
• Commodities