Hyosung Group chose local private equity (PE) firm STLeaders PE as the preferred bidder for its financing arm Hyosung Capital on September 15. The seller plans to sign a share purchase agreement with the PE firm as early as this week.

The acquisition price for Hyosung Capital is reportedly in the range of between 380 billion won ($323.7 million) and 390 billion won, which is more than 100 billion won short of the seller’s desired price of 500 billion won. The seller probably can’t drag the process on as it needs to complete the sale 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.

Hyosung Group initially sought a valuation of 500 billion won, more than 1.2 times the book value of the company’s equity. But the group had not enough time. The seller began its sale process in earnest through BDA Partners one year after its sale plan was first revealed in April 2019. Hyosung Group selected multiple firms like Daiwa Securities and Credit Suisse to handle its sale process but its efforts bore no fruit due to the large price gap between potential buyers and the seller.

Market watchers said the seller could have sold Hyosung Capital at a higher price if it began the sale process last year because market participants now start to see the company as a fire sale.

“The lack of attractiveness of the company compared to other credit finance firms amid the tight timeline has made potential buyers hesitate to make their bets,” said an industry source.

The outbreak of the Covid-19 also may have dragged down the valuation of Hyosung Capital which specializes in equipment leasing. Foreign investors, who missed an opportunity to buy New Zealand’s UDC Finance, reportedly offered a price-to-book ratio of roughly 1.0 times, reflecting the equipment industry’s struggle from the Covid-19 pandemic. (Reporting by Ik-hwan Choi)