IMM Private Equity (IMM PE) has started to receive preliminary offers for Taihan Electric Wire, the second largest wire producer in South Korea, and will allow a flexible deadline so potential buyers abroad can compete, according to sources.
The Seoul-based firm has sent out information packages on the cable manufacturer to more than 10 potential buyers, including industry players and private equity (PE) firms. Several domestic and foreign strategic investors are being mentioned as strong candidates to acquire the company. Credit Suisse is managing the sale.
The decision to start the bidding came after LS Cable & System, the largest player in the market, pulled out of negotiations with IMM PE last year, probably because of concerns about antitrust scrutiny and the financial burden of the acquisition.
The South Korean cable market is an oligopoly of three major companies, LS Cable & System, Taihan Electric Wire and Gaon Cable. LS Cable & System reported revenues of 3.24 trillion ($2.9 billion) in 2019, while Taihan Electric Wire and Gaon Cable posted revenues of 1.39 trillion won and 757.1 billion won respectively.
Taihan Electric Wire recorded record earnings and revenue in 2020. Its revenue grew 3.8% year-on-year to 1.44 trillion won and operating income jumped 99% to 51.5 billion won thanks to increased sales of high margin products in overseas markets.
IMM PE acquired 71.5% of the then debt-ridden company for about 300 billion won in 2015, but reduced its stake to 50% in four block transactions over the last two years.
Taihan Electric Wire’s market capitalization is around 1 trillion won. The 50% stake is expected to be worth as much as 700 billion won, including a control premium. (Reporting by Si-eun Park)