MBK, Hahn & Co., IMM raising trillions of won for M&As

From left are MBK Partners Chairman Kim Byung-ju, Hahn & Company CEO Hahn Sang-won and IMM Private Equity founder Song In-jun. / Courtesy of each company

By Park Jae-hyuk

MBK Partners, Hahn & Company and IMM Private Equity are speeding up their fundraising efforts in apparent moves to prepare for M&As in the forthcoming year, according to industry sources, Monday.

Given that various companies in finance, manufacturing and retail are set to go on sale in 2020, the top three homegrown private equity firms (PEFs) have drawn keen attention from investors.

MBK, which manages the largest amount of assets among the three, is seeking to raise $6.5 billion by the first half of next year for its fifth buyout fund, MBK Partners Fund V.

It has already raised $4.2 billion for the Northeast Asia-focused fund.

According to industry sources, MBK Partners Chairman Kim Byung-ju told limited partners in Tokyo, Nov. 18, that his company successfully raised $4.2 billion for the initial closing for the fifth fund.

In a memorandum submitted to the New Jersey State Investment Council to propose investment in MBK Partners Fund V, the PEF said, "MBK has a proven ability to develop relationships with key constituents and to navigate the challenges in executing complex transactions, especially in regulated industries such as financial services and telecom and media," hinting that it will continue its investments in the finance and telecommunication sectors with the blind-pool fund.

In 2018, MBK gained over 2 trillion won ($1.69 billion) in profit from selling ING Life Insurance, which is currently Orange Life Insurance, to Shinhan Financial Group. It also took over control of Lotte Card in October.

Although the PEF has yet to sell D'live in Korea, it successfully exited China Network Systems in Taiwan in December 2018.

Hahn & Co., the nation's second-largest PEF, said Oct. 1 it finished raising 3.8 trillion won for its third blind-pool fund, which was the largest-ever capital pool dedicated to the Korean market.

The company has focused on smokestack industries, such as cement, shipping and auto parts, but some observers have expected the third fund will be used to acquire financial services companies, such as the Korean unit of Prudential Life Insurance or KDB Life Insurance.

They cited Hahn & Co.'s previous attempts to take over Lotte Card and Lotte Insurance as the reason.

Industry sources familiar with this issue, however, said there is a slim chance of the PEF buying the life insurers, because the nation's insurance industry is unlikely to show any signs of improvement for a while.

The sources are also skeptical of Hahn & Co.'s acquisition of food and beverage companies, as they have witnessed Morgan Stanley Private Equity facing difficulties in exiting Nolboo and IMM's failure in selling Hollys Coffee.

IMM, the smallest among the top three homegrown PEFs, has raised 1.9 trillion won for its fourth blind-pool fund.

Given that the fundraising for the fourth fund will close in February 2020, observers expect IMM to raise up to 2 trillion won for the fund.

The PEF used its fourth fund already in buying Linde Korea, which is currently under AirFirst, for 1.3 trillion won. Another 750 billion won was also used paid-in capital increase of Shinhan Financial Group. It also successfully exited Tailim Packaging and its subsidiary Tailim Paper.

IMM, which has mainly relied on domestic limited partners, such as the National Pension Service and the Korea Teachers' Credit Union, unlike the other two PEFs that have relied more on foreign institutional investors, is also mentioned as a potential buyer of Prudential's local unit, considering its investments in financial firms, such as Shinhan, K bank and Woori Financial Group.

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