The first round of bidding for South Korean financial services firm Hyosung Capital is around the corner, with the market’s attention focused on how domestic potential buyers will response to the deal.
Hyosung Group will hold the first round of bidding for its financial services arm on July 10, according to industry sources. Hyosung Group needs to complete the sale of Hyosung Capital by the end of December to comply with local regulations that forbid a non-financial holding company from owning a stake in a financial services company. The group plans to finish the entire process by October at the latest.
More than 10 prospective buyers including China’s Ping An International Financial Leasing Co Ltd have expressed an interest in the company. Hyosung Group is expecting a positive response from foreign potential buyers. The group has postponed its first round of bidding to give enough time to foreign investors.
Meanwhile, multiple mid-sized domestic PE firms have reportedly tapped local financial conglomerates to collaborate n in the acquisition of Hyosung Capital.
Most of the domestic prospective buyers are interested in Hyosung Capital’s equipment leasing portfolio. Until now, credit finance firms have focused on equipment leasing rather than household debt or installment. Industry insiders expect Hyosung Capital may boost profitability of its equipment leasing business by lowering interest rate through investments made by financial holding firms or strategic investors.
Hyosung Capital has built solid relationships with machine tool manufacturers at home and abroad. Foreign potential buyers have reportedly expressed their interest in Hyosung Capital, intending to enter the Korean market by connecting their local machinery industry and Hyosung Capital.
Market insiders questioning the price and non-price terms that will be offered by domestic potential buyers. Considering most of the financial conglomerates already have credit finance businesses in their portfolio, they may see limited synergies from the acquisition and decide not to join the race.
Hyosung Group is seeking to sell its financial services arm at a price-to-book ratio of more than 1.2 times. (Reporting by Ik-hwan Choi)