South Korea's largest private equity firm to participate in acquisitions of Air Products Korea and SK Specialty

MBK Partners, South Korea's largest private equity fund (PEF) manager, will participate in tHe acquisition of Air Products Korea and SK Specialty, the largest merger and acquisition (M&A) this year.

AcCording to the investment banking (IB) industry report on the 13th, MBK Partners, Hahn & Company (Han & Co.) and Brookfield Asset Management submitted letters of intent (LOI) for preliminary bidding for SK Specialty. MBK Partners and Han & Co., two of the best PEF companies in Korea, have been in a standoff.

SK Specialty, which produces special gases such as nitrogen trifluoride (NF3), is a wholly-owned subsidiary of SK Corporation and is the No. 1 company in the field of semiconductor special gases in South Korea. Last year, its operating profit before amortization (EBITDA) was about 240 billion won. If a multiple of 17 is used, it would be about 4 trillion won, but some analysts say this is a bit too high.

MBK Partners' advantage is that it has a high level of understanding of the industry, having completed the acquisition and sale of DIG Air Gas (formerly Daesung Industrial Gas) in the past. In 2017, it acquired 100% of Daesung Industrial Gas from Daesung Group and Goldman Sachs for 1.7 trillion won, and sold it to Macquarie Asset Management for 2.5 trillion won in 2020. Han & Co. has a close relationship with SK and has acquired six SK Group affiliates in the past seven years. At the beginning of this year, it acquired SK N-Pulse's fine ceramics division (Solmics), SKC's industrial materials division (SK Microworks), SK Chemical's bioenergy division (SK Ecoprime), SK Shipping (71% management stake) and SK D&D (majority shareholder 27.5%), as well as SK Encar's direct division (K-Car).

It is understood that in addition to MBK Partners, Kohlberg Kravis Roberts (KKR), Carlyle, Stone Peak and I Squared Capital will participate in the preliminary bid for industrial gas company Air Products Korea, which is said to be worth 5 trillion won. The non-binding price offer (non-bound Offer) closed at 8 pm that day, and the sales manager was Citigroup Global Markets Securities. It is expected to be a two-way game between MBK Partners and KKR. KKR has long formed an acquisition financial group consisting of major domestic banks and securities companies. The sale target is 100% of the shares held by Air Products and its affiliates. Han & Co did not participate.

Air Products Korea, the Korean subsidiary of global industrial gas company Air Products, is the second largest domestic industrial gas company after Linde Korea (sales of about 1 trillion won). It produces industrial gases such as oxygen, nitrogen and argon and supplies them to large conglomerates such as Samsung Electronics and SK Hynix.

Air Products Korea's operating profit before amortization (EBITDA) last year was 232.8 billion won, and if a multiple of about 20 is used, the sales price is around 4 trillion won. In addition, there are analysts who say that due to the impact of Samsung Electronics' selection of gas suppliers for the Pyeongtaek Semiconductor Plant 5 (P5), the EBITDA should be 260 billion to 270 billion won. In this case, the amount exceeds 5 trillion won.