Korea Investment Private Equity (KI PE) will invest 55 billion won ($49 million) in auto parts maker Myoung Shin through its newly formed project fund, sources said.
KI PE will acquire exchangeable bonds worth 25 billion won issued by MS Autotech, which will be exchanged with shares of Myoung Shin owned by MS Autotech, the largest shareholder of Myoung Shin with a 65.6% stake. KI PE will also acquire convertible bonds worth 30 billion won which will be issued by Myoung Shin.
The PE firm has focused on KOSDAQ-listed MS Autotech to reduce risks and uncertainties of investing in the private company. KI PE plans to exit Myoung Shin by converting its shares into common shares when the company has a future listing.
Founded in 1995, Myoung Shin supplies auto parts to Hyundai Motor, Kia Motors and Tesla. Tesla accounts for 35% of total revenue, with the remainder from Hyundai Motor and Kia Motors. MS Autotech Group is engaged in businesses that include assembling vehicle body modules, manufacturing cold and hot stamping parts, contract manufacturing of electric vehicles (EVs), and manufacturing battery packs.
Myoung Shin has production bases in Gunsan and Asan. The Gunsan plant, acquired from GM Korea in June 2019, has a capacity of 250,000 to 270,000 units per year.
The company has focused on contract manufacturing for global EV firms like Faraday Future and Daechang Motors in recent years. Myoung Shin signed a memorandum of understanding with Faraday Future for contract manufacturing in 2020.
The EV contract manufacturing market is expected to grow by 21-25% per year by 2025, according to the automobile industry. Myoung Shin plans to become a leading contract producer by establishing a value chain, including research & development and design, parts procurement and logistics and inventory management.
The company is expected to generate 76 billion won of revenue from its contract manufacturing and this may exceed the 1 trillion won level in 2024.
“MS Autotech Group has recently received a lot of attention due to an initial public offering of Myoung Shin Industry,” said an industry source, adding, “Myoung Shin is recognized as a company with as much potential as Myoung Shin Industry.”
Myoung Shin Industry was oversubscribed by 1196 times during its book building process for institutional investors last year, which beat the previous record of 1117.25:1 set earlier in the year with the IPO of Big Hit Entertainment.
The IPO price was set at 6500 won, 12% higher than the top range of 4900-5800 won.
“Contracts between clients are the key when valuing a contract manufacturer and Myoung Shin’s enterprise value is highly likely to gradually increase,” the source said. (Reporting by Byung-yoon Kim)