Asian asset sales to boost Korea PE deals

GPs are targeting Asian assets being sold by European corporates, such as Tyco's Korea unit.

European corporates have become more bearish on Asia Pacific and see too much competition from local players, creating opportunities for private equity, according to Mikio Kumada, executive director at LGT Capital Partners.

For example, this week Kohlberg Kravis Roberts and Bain Capital emerged as additional bidders for Swiss security systems company Tyco International’s $1.6 billion South Korea unit, along with Affinity Equity Partners, CVC Capital Partners and MBK Partners, media reported, citing sources familiar with the matter.

Although the specific reason for Tyco’s divestment is unclear, Kumada told Private Equity International, “From a macro perspective, it could be a more pro-cyclical move meaning that some Europeans have simply decided to get out of Asia because they’ve become slightly more bearish after being invested here for some time.”

Slowing growth in the region has disappointed some previous investors. Kumada added that interest in Asian assets from local or regional players, particularly the cash-rich Japanese buyers, offered tough competition for European corporates, some of which are now leaning toward investing in the US.

Moreover, some distressed European companies are choosing to sell-off Asian units.

Pan-Asian private equity firm MBK is in the process of acquiring ING Korea, the wholly-owned life insurance business in South Korea, from parent company ING Group, which has committed to divesting half of its Asia portfolio by the end of 2013 following its 2008 bailout, according to a statement from ING Group in August. The deal is expected to be worth $1.65 billion. 

Since its 2008 bailout, ING has been divesting a number of its offshore units, including those in Canada, Australia and New Zealand, and must now sell its Japan unit in order to satisfy its agreement with European Union regulators to offload more than 50 percent of its Asia operations before the end of 2013, PEI reported earlier.

Such deals are also likely to boost Korea’s private equity investment values, after the country’s deal figures have dropped and plateaued since a record year in 2011.

About $1.2 billion was invested in Korea across 36 private equity deals during 2013, an equal value to the amount invested in 2012, according to data from Thomson Reuters. The figure is a 36 percent decline from the $2 billion invested in 2011 – a record year for private equity deals in the country.

Moreover, GPs with significant exposure to Korea have recently concluded relatively fast fundraising efforts. MBK, which is a Seoul-based firm, closed its third fund “vastly oversubscribed” on $2.7 billion earlier this year, while Anchor Equity Partners closed its maiden Korea-focused vehicle on $500 million in October.