South Korean real estate and infrastructure operation & management (O&M) company YIDO is expected to be valued at around 300 billion won ($268 million) for the pending acquisition of a majority stake by Macquarie Korea Asset Management.
Macquarie is believed to be looking at buying a 40% stake from existing investors, including IMM Investment and Dominus Investment. This could also involve a stake of 5-10% held by chief executive Choi Jung-hoon, who is now the main shareholder.
Choi could exit the deal with 5 billion won to 30 billion won if the estimated valuation is realized. He currently owns 45% of the company but will become the second-largest shareholder once Macquarie seals the deal.
YIDO recorded revenue of 147.2 billion won on a consolidated basis in 2019, up from 74.4 billion won in 2018 and 52.1 billion won in 2017. It is expected to have generated revenue of 200 billion won in 2020 as its revenue has increased at a compound annual growth rate of around 70% over the past three years.
The company’s operating income was 15.6 billion won in 2019, compared with 6.6 billion won in 2018 and 4.4 billion won in 2017, and it is believed to have risen to at least 20 billion won in 2020 based on the average operating margin of around 10%. Earnings before interest, tax, depreciation and amortization (EBITDA) are estimated to have exceeded 30 billion won in 2020, given its amortization of tangible and intangible assets of 11 billion won in 2019.
YIDO chose Veolia Environment and Suez Environment as peer companies when it tried to go public in 2020 through sale managers Mirae Asset Daewoo and Daishin Securities. Their enterprise value to EBITDA multiple was 12 to 13 times.
YIDO was valued at over 200 billion won when it raised funds from financial investors including Dominus Investment last year, with its EBITDA in 2019 estimated at over 26 billion won. Macquarie is highly likely to give a multiple of over 10 times when valuing the company this time.
Net borrowings, which amounted to over 100 billion won in 2019, could have an impact on the valuation, but an increase in normalized EBITDA and a management right premium are expected to overcome some of the possible negative impacts.
YIDO sought a market capitalization of 300 billion won when it applied for a preliminary review for a Korea Exchange listing last year, though this was postponed.
There is speculation that Choi could return as the largest shareholder if Macquarie exits YIDO through a possible initial public offering and he buys back his stake. Another scenario is that Choi could sell his shares at a higher valuation along with Macquarie when it exits YIDO.
Choi will retain his management rights after the company is acquired by Macquarie. (Reporting by Si-eun Park)