SkyLake Equity Partners will buy Retech for about 200 billion won ($180 million), as it takes a gamble on the strong financial status and profitability of the road management vehicles and equipment manufacturer while moving to expand its investment scope.

The private equity firm has signed a stock purchase agreement to acquire all shares in Retech, industry sources said on Thursday (November 26). It is the company’s first acquisition of a vehicle producer.

Market insiders said Retech’s strong financial status has been the key to striking the deal. Retech achieved a fivefold increase in revenue between 2005 and 2019 and a nearly tenfold increase in operating income. Revenue amounted to 19.6 billion won in 2005 and operating income was 1.7 billion. The company’s operating margin remained at around 15% during the same period.

A notable feature in Retech’s financial statement is that it has been in a net cash position, with no financing cost since 2014 and the debt ratio in a 20% range over the past five years. Cash and cash equivalents rose from 13.8 billion won in 2015 to 44.8 billion won in 2019.

SkyLake has diversified investments since the launch of its 10th blind-pool fund. The PE firm has invested in pipe coating company Coating Korea, insurance sale agency A+ Asset Advisor, online accommodation service platform Yanolja and restaurant chain Outback Steakhouse Korea through the fund.

The company will finance the Retech deal through its 10th and 11th blind-pool funds, with the 10th fund spending all of its remaining dry powder on the acquisition. SkyLake recently formed the 11th fund, worth 750 billion won. (Reporting by Byung-yoon Kim)