Investment banks move fast to arrange financing for Koentec acquisition

South Korean investment banks are moving fast to better position themselves in arranging acquisition financing for potential buyers of the country’s waste management companies Korea Environment Technology (Koentec) and Saehan Environment.

Shortlisted candidates for Koentec have conducted due diligence using virtual data room (VDR) since the end of April, source familiar with the matter said on May 1. Macquarie PE, the seller of Koentec, has selected MBK Partners, STIC Investment, a consortium of E&F Private Equity (E&F PE) and IS Dongseo, and TSK Corporation as shortlisted bidders on April 17 based on the results of the preliminary bid.

South Korea’s M&A industry is currently going through a difficult period. According to the bell’s league tables, the total value of announced deals was 5.23 trillion won for the first quarter with the number of transactions totaling 70, almost halved compared to the same period a year ago (10.6 trillion won). The outbreak of the coronavirus has resulted in delayed or cancelled M&A transactions.

Against this backdrop, the sale of Koentec is one of few new deals that remain on schedule, heating up competition among investment banks.

KB Securities is expected to provide acquisition financing for the consortium of E&F PE and IS Dongseo. It is said the consortium has strong will to acquire the waste management company. E&F PE has invested in many environment and waste companies, including Insun Environmental New Technology, Yoo Chang Industrial and Daewoon Development Company. IS Dongseo is developing the waste disposal business as its new growth engine. It is expected to actively participate in the race, considering synergies to be created between its existing portfolio companies and Koentec.

TSK Corporation is reinforcing the environment and waste business as a new growth engine. The company has recently participated in M&A deals relating to environment and waste business. TSK Corporation has selected Woori Bank as an arranger of the acquisition financing.

STIC Investment has picked Korea Investment & Securities to arrange acquisition financing for the deal. MBK Partners, who was initially considered a dark horse of the deal, is now less inclined to acquire the company, raising the possibility of walking away from the deal given its lack of passion.

Macquarie PE has reportedly allowed two or three more candidates to conduct due diligence, one of which is said to be Stonepeak Infrastructure Partners, an infrastructure-focused PE firm headquartered in New York. (By reporters Han Hee-yeon and Kim Hye-ran)