Foreign prospective bidders for South Korea’s Hyosung Capital will likely use the recent acquisition of New Zealand’s UDC Finance by Shinsei Bank as a reference due to similarities between the two financial services firms, sources said.
Australia and New Zealand Banking Group announced earlier this month that it had agreed to sell UDC Finance, its non-bank financing firm, to Japan’s Shinsei Bank for NZ$762 million ($480 million).
The purchase price represents a price-to-book ratio of 1.2 times net tangible assets at the end of March. Shinsei Bank beat notable contenders such as Apollo Global Management and Cerberus Capital Management in the bidding race.
UDC Finance and Hyosung Capital have several things in common, industry watchers said. They both specialize in equipment loans and have a similar level of net assets, while their borrowing costs are also comparable.
Many of the unsuccessful foreign bidders for UDC Finance are said to have shown an interest in buying Hyosung Capital, raising Hyosung Group’s hopes that its asset finance business could be priced at the valuation multiple used in the UDC deal. The conglomerate is seeking a valuation of about 416 billion won ($345 million), a price-to-book ratio of roughly 1.0 times net tangible assets.
Hyosung Capital could be attractive to foreign investors because South Korea’s equipment loans market is larger than that of New Zealand’s and the deal is not subject to domestic regulatory approval. But some factors could drag the sale price down, analysts said, including the firm’s distressed assets and a lack of enthusiasm by potential domestic buyers about the target.
“UDC Finance can serve as a reference to potential buyers for Hyosung Capital. But the seller needs to be able to clearly justify the valuation,” an industry insider said.
The first round of bidding was delayed for two weeks to around July 10 to give foreign investors enough time to prepare their offers. Some are having difficulties conducting due diligence due to Covid-19 travel restrictions.
China’s Ping An International Financial Leasing and some strategic investors from Japan and Australia are among prospective bidders for the firm, along with several private equity firms in South Korea.
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 bidding process is expected to take at least four months. (Reporting by Ik-hwan Choi)