South Korean private equity firm Hahn & Company’s acquisition of SK Chemicals’ biofuel business is going as smoothly as planned.
Hahn & Co. is considering using acquisition financing to take over biofuel unit of SK Chemicals, the chemicals and life science arm of the country’s conglomerate SK Group, said sources with knowledge of the matter said on March 18. It is said that NH Investment & Securities will arrange the acquisition financing.
Hahn & Co.’s unexpected announcement of its acquisition of SK Chemicals’ biofuel unit at the beginning of February has made domestic financial investment industry busy. Amid an absence of big-ticket deals in the early part of this year, the move has made financial firms to be nimble to catch a possible opportunity to arrange acquisition financing. The latest deal may also act as a cornerstone for further opportunities.
There were some expectations that Hahn & Co. may not borrow money as the deal size is only 300 billion won and the PE firm has plenty amount of funds with the firm raising 3.8 trillion won for its third blind-pool fund last year. Some have expected that the PE firm will finance the entire acquisition cost through the fund without borrowing and use money from outside later by conducting recapitalization, etc. However, with the acquisition process going forward, the PE firm has reportedly decided to fund part of the acquisition cost in acquisition financing.
The extraordinary general meeting of SK Chemicals held on March 17 has resolved to approve the sale of its biofuel business. The 382.5 billion won worth transaction will complete at the end of May.
With the planned acquisition of SK Chemicals’ biofuel business, Hahn & Co. reportedly aims to capitalize on the rapid growth of the green fuel market. The business unit manufactures and distributes biofuels such as biodiesel and bio heavy fuel oil. The book value of its assets totaled 132.4 billion won at the end of 2018 and sales was 277 billion won for 2018.
Industry watchers expect Hahn & Co. is likely to explore ways to maximize synergy between the biofuel business and the firm’s existing portfolio companies in the transportation sector, including H-Line Shipping, SK Shipping and K Car. This represents the likelihood of additional acquisitions by Hahn & Co. or its portfolio companies in the future, which is why financial firms are closely watching the latest deal, industry insiders said.
Hahn & Co.’s acquisition of SK Chemical’s biofuel business will be done through its special purpose company K-Green System, which was established on February 19 for the deal. (By reporter Han Hee-yeon)