Private equity firms may join the race for Hyundai HCN, which is expected to begin later this month, though they are more likely to end up pacesetters.

Credit Suisse (CS) which manages the sale of Hyundai HCN plans to start its marketing campaign soon, according to investment banking (IB) industry sources on Monday. Its initial plan was to hold a preliminary bid within this month, but there is a possibility of a delay. If the preliminary biding is postponed until early May, the buyer is likely to be selected at the end of May at the earliest.

The sell-side is anticipating PE firms to join the race for Hyundai HCN. Some industry sources said that Hyundai Department Store Group, the seller of Hyundai HCN, will run marketing campaigns toward domestic PE firms with blind-pool funds. The seller thinks that it has to have financial investors join the race in order for the sale to receive strong interest.

“The seller may not be able to anticipate higher acquisition price when only strategic investors compete for the company. The seller is likely to expect financial investors with deep pockets to join the race and push up the price,” said an IB industry source.

However, the likelihood of a PE firm acquiring Hyundai HCN is low. Many PE firms are not reviewing the deal, bearing in mind that MBK Partners and Carlyle Group’s struggle in the domestic pay-TV service industry. The fact that potential buyers of Hyundai HCN will only be Big Three mobile carriers when exiting the investment is also one of the factors that weaken the motivation.

Supporting three mobile carriers as a financial investor won’t be easy, either. The mobile carriers are likely to be in a favorable situation to finance the acquisition by issuing corporate bonds, taking advantage of lower interest rates.

SK Telecom and KT have credit ratings of AAA and LG Uplus has a credit rating of AA. LG Uplus recently issued its bonds at an interest rate of mere 2.058 percent. Interest rates may go lower, with the Bank of Korea keeping its policy rate frozen at an all-time low of 0.75 percent and government-run banks purchasing corporate bonds.

In this regard, some market observers pointed out that PE firms’ role in the race may be limited to pacesetting, helping the sale process garner a lot of interest.

Yet, LG Uplus, which has the weakest financial soundness among the three mobile carriers, may join hands with PE firms. This is because LG Uplus may be under financial pressure if it makes a cash payment for the acquisition amid its higher proportion of net debt compared to peers.

“Given various factors, PE firms are not in a situation where they can actively join the competition,” said an IB industry source. The source added that it has to be seen whether the seller’s strategy to spur competition will actually lead to PE firms’ participation in the deal. (By reporter Choi Ik-hwan)