South Korean private equity firm STIC Investments are making little progress in finding potential buyers for Daesung Eltec, a car AVN (Audio, Video, Navigation) system company, as the economic fallout from the COVID-19 outbreak has crippled the manufacturing industries including carmarkers.
STIC Investments has faced challenges in selling its controlling 45.51 percent stake in Daesung Eltec, sources familiar with the matter said on Wednesday. In February, the firm hired Deloitte Anjin to run an auction process for the company and has since been sounding out possible bidders.
STIC initially intended to take its time to find a suitable buyer for the company. It also had reportedly approached some industry players in the country to see their interest, though they have yet to signal their intent to bid for the company.
After receiving a relatively lukewarm response from investors, STIC has changed its strategy and decided to also consider a private sale. The firm reportedly has not received sufficient interest so far to go ahead with an auction process, with the economic fallout from the COVID-19 outbreak – which affected the manufacturing industry overall, while forcing private equity firms to be more cautious in making investment decisions – being another blow to the sale process.
This means chances are increasing that Daesung Eltec could be sold privately, rather than through a public auction. Indeed, the seller is now said to place more weight on the possibility of a negotiated sale.
“Daesung Eltec’s situation is no different from other cases affected by COVID-19,” said an industry insider. “The expected value of the company is relatively small but investor sentiment has been severely dampened, which is why the seller is putting the greatest emphasis on getting a sale done.”
STIC invested in Daesung Eltec via its third blind-pool fund, STIC Private Equity Fund III. There is enough time for the firm to exit its investment in the company because the life of the fund is slated to end in 2022. But a potential delay in the planned sale could affect the schedule for its exit from other investments made via the same fund.
That is another reason STIC is now putting more weight on a negotiated sale, focusing on speed and certainty of a possible transaction, industry watchers said. STIC’s block sale of a 10.41 percent stake in the company in early March was part of efforts to attract more potential buyers. The firm is also reportedly open to ideas on the investment structure suggested by buyers.
Daesung Eltec, which was founded 40 years ago, specializes in developing and manufacturing the car AVN system. STIC became the largest shareholder in Daesung Eltec back in 2013 after injecting capital into the then cash-strapped company. (By reporter Choi Ik-hwan)