Korean Federation of Community Credit Cooperatives (KFCC) will invest 50 billion won ($42 million) in a fund being raised by E&F Private Equity (E&F PE) to finance the acquisition of Koentec Co Ltd, industry sources said on Thursday (August 6).
E&F PE and construction company IS Dongseo Co Ltd won a bidding process in June to buy the waste management company for about 500 billion won. The two companies will raise 200 billion won and 100 billion won respectively, with the remainder being funded by loans. KFCC’s investment in the fund accounts for about a quarter of E&F PE’s fundraising.
KFCC has been attracted to Koentec because of its stable business model and cash-generating ability, industry watchers said. The waste management sector is less volatile than the overall economy and demand for industrial waste management is on the rise, indicating strong growth potential for the company.
The partnership with strategic investor IS Dongseo would mean that E&F PE has a clear exit route, and this also could be a reason for KFCC’s investment in Koentec.
IS Dongseo has recently focused on expanding its waste management operations. The Koentec deal is the second joint acquisition by E&F PE and IS Dongseo after their purchase of Kolon Environment & Energy Co Ltd in March. IS Dongseo also bought Insun Environmental New Technology Co Ltd from E&F PE in June 2019.
KFCC has been escalating its private equity activity, with many project-specific funds counting it as an anchor investor. The group invested 200 billion won in a fund raised by Credian Partners to buy MagnaChip’s foundry business earlier this year. It has also invested in several other recent deals, including Glenwood Private Equity’s 2019 acquisition of Korea Glass Industrial Co Ltd and Centroid Investment Partners’ acquisitions of Kolon Advanced Fiber Inc in 2019 and Booxen Co Ltd this year.
KFCC is said to focus on the quality of assets acquired by private equity firms when making investment decisions, rather than the firms’ track record. Its investments in project-specific funds to date have reportedly delivered an average internal rate of return of more than 10%. (Reporting by Hye-ran Kim)