Private equity firm IMM Investment has been shut out of potential acquisition deals in the expanding waste management industry due to concerns by competitors over the growing market ambitions of its waste subsidiary EMK.  

IMM has not been listed among the potential bidders for EMC Holdings, which has attracted wide interest from investors in South Korea and overseas, and also did not participate in the sale processes for Koentec and Saehan Environment.

Affirma Capital, which was formerly Standard Chartered Private Equity, is selling its waste processor EMC Holdings through Citigroup Global Markets Securities and Standard Chartered Securities. Non-binding offers will soon be accepted from potential buyers in the first round of bidding, sources said on Wednesday (June 3).

Numerous investors are said to be preparing offers, including domestic and foreign private equity firms, strategic industry investors and infrastructure funds, underlining the surging popularity of waste companies.

“The waste management business is less cyclical than other sectors and has a high entry barrier, which contributes to the generation of stable profits,” an industry insider said. “Potential investors will likely pay more attention to EMC than Koentec as EMC operates water treatment facilities as well.”

More than 10 investors took part in the first round of bidding in April for a 59% stake in Korea Environment Technology (Koentec) and a 100% stake in Saehan Environment, which are being sold by Macquarie Korea Opportunities Management (Macquarie PE). Four bidders submitted binding offers last month to deal manager JP Morgan, with the preferred buyer due to be selected through progressive bidding.

IMM Investment was again conspicuously absent, even though Koentec and Saehan Environment would probably both fit with its declared intention of building a portfolio of waste management businesses based around an existing investment in Eco Management Korea (EMK). IMM Investment bought EMK in 2017 and EMK Ulsan the following year and the company has said it wants to double the size of EMK through bolt-on acquisitions.

Private equity sellers seemingly want to avoid the risk of disclosing sensitive information to IMM Investment because of its market presence, industry watchers said. They are said to be concerned that IMM Investment could pull out of the bidding process after gaining key information about the target companies.

“IMM Investment is expected to stick to a bolt-on strategy as deals are frequent in the waste management sector,” said the industry insider. “But EMK will likely focus on targeting small and mid-sized deals in the future, so it can take longer than expected for EMK to grow to the size it aims to be.” (Reporting by Byung-yoon Kim)