Private Equity News & Analysis

CCMP Asia and Affinity exit from Mando in Korea

CCMP Capital Asia and Affinity Equity Partners are selling their shares in Mando Corp back to the original vendor of the Korean auto parts maker ten years after insolvency threats forced the disposal.

-

Halla Engineering and Construction, a Korean construction group, is set to regain control of Mando, an auto-parts business, after ten years from Affinity Equity Partners and CCMP Capital Asia in a 651.5 billion won (US$688 million) deal, the company disclosed in an exchange filing.

The sale of a 72 percent stake in Mando to the private equity firms took place three years after Halla was forced to dispose assets in the wake of the 1997 Asian financial crisis. The pan-Asian private equity fund managers acquired control of Mando for $446 million in 2000.

Kohlberg Kravis Roberts had also been in negotiations to buy Mando, but the talks collapsed over opposition from Hyundai and Kia Motors, a Halla official told Yonhap, a Korean news agency. Halla generates nearly 70 percent of its revenue from the two Korean automakers.

“While KKR offered a higher price, it failed due to a firm opposition from Hyundai and Kia,” the unnamed official told Yonhap.

Foreign private equity names such as KKR may be greeted with a certain degree of resistance if not hostility in Korea following a spate of deals where buyout groups made lucrative tax-free exits from distressed assets in the wake of the 1997 crisis.

Lone Star chairman John Grayken has been detained in Seoul as prolonged investigations over the US buyout firm’s investment in Korea Exchange Bank drags on. Local corporates have proven to be strong rivals for private equity funds that have been attempting to make acquisitions in the country.

Before Mando, Affinity sold Himart to Eugene Corp, a local concrete and construction firm that beat CCMP Asia and MBK Partners to buy the electronics retailer.

“Price is no longer the only factor,” said a general partner, who has been an active investor in Korea.

He added  that given the local sensitivities toward foreign funds, the backgrounds of potential buyers are often considered by the local management of a company that is being acquired. Ultimately, the “fit” between the new owners and the existing management could determine the outcome of a transaction more than price alone.