SCPE backs acquisition of Korean packaging business
Standard Chartered Private Equity (SCPE) is participating in the KRW415 billion ($396 million) acquisition of South Korean conglomerate Hyosung Corporation’s packaging business.
Hyosung identified SCPE as the buyer in a regulatory filing. The identities of other investors in the deal have not been disclosed, but the check size falls well beyond SCPE's typical range for solo transactions in Korea.
Hyosung said the divestment would strengthen its balance sheet and facilitate restructuring. A number of Korean conglomerates are selling off non-core assets to private equity buyers in order to ease their debt burdens or as a result of political pressure.
Established in the 1960s as a fabrics producer, Hyosung's interests now span power systems, industrial materials, textiles, chemicals, construction, trading and IT and communications. The company posted revenues of KRW12.6 trillion in 2013 - roughly the same as the previous year - but it made a loss of KRW236.2 billion compared to a profit of KRW141.6 billion in 2012.
The packaging business - Packaging PU - is part of the chemicals division. It is a leading supplier of plastic bottles to domestic beverage companies as well as global players such as Coca Cola and Pepsi Cola. Hyosung said in its second quarter performance review that the business was seeing increased profitability due to high seasonal demand and an expanded product range.
The chemicals division generated sales of KRW419 billion in the second quarter of 2013 - the most recent period for which division-by-division performance breakdowns are available - operating income of KRW45 billion. This accounted for 12.5% of overall group sales.
In addition to packaging, the division produces resins, films and chemicals used by manufacturers across numerous industries.
Corporate divestments helped drive Korean private equity buyouts to $4.9 billion in 2013, 17.2% of the regional total. So far this year, these transactions have come to $4.8 billion, more than one quarter of the regional total. Recent carve-outs include Morgan Stanley Private Equity Asia's acquisition of a construction materials business from a subsidiary of Hanwha Group, and Goldman Sachs-led consortium's purchase of a controlling stake in the industrial gas business of Daesung Group.
In August, MBK Partners sold another domestic bottle manufacturer, Techpack Solutions, to Dongwon Group, for KRW250 billion. The private equity firm bought the business in 2008 through a carve-out from Doosan Corporation. It is Korea's largest producer of glass bottles, the second-largest in plastic bottles and the third-largest in cans.
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