IMM Private Equity has acquired a 24 percent stake in POSCO Specialty Steel for KRW 250 billion (€168 million; $224 million), according to a company statement. The firm is co-investing with Mirae Asset Management, splitting the investment value equally.
POSCO is a steel producer based in Seoul that has a market share of between 50 and 60 percent, according to the firm. IMM and Mirae paid about 7x EBITDA and 11x price-to-earnings ratio for the business, based on its performance over the past five years.
The deal is IMM’s fifth from its second private equity vehicle and its second transaction in 2013. The firm has identified an IPO as the best exit route for the investment, possibly within the next five years, the statement said.
Meanwhile, it has plans to grow the business domestically and in Vietnam, where POSCO has already invested $590 million to build an integrated steel mill in order to take advantage of the growing steel demand in Vietnam and Southeast Asia.
Despite a recent downturn, the construction industry in Vietnam is expected to grow steadily at least at 6 percent per annum going forward, the statement said.
Posco Specialty marks IMM's second deal in Korea
Joseph Lee, managing director at IMM, told Private Equity International: “POSCO is one of the top steel-mill operators in the world. So, for this company to expand into Southeast Asia further makes this a pretty interesting investment because you have a Korea and also a pan-Asian angle,”
He said that although IMM has closed two deals this year, the investment environment in Korea is not easy. “I wouldn't say it was buoyant. Korea is impacted by economic trends [globally], so I think firms that source private deals [are the ones] that can get deals done.”
In July, IMM acquired Holly’s Coffee, a Korean coffee shop franchise, expecting its total investment in the business after add-on acquisitions to reach $100 million, PEI reported earlier.
Korea is attracting foreign private equity investors as well. A recent buyout came earlier this month when Baring Private Equity Asia bought Logen, a domestic parcel delivery company, for a reported $140 million.
Portfolio companies are also beginning to show strong results. South Korean companies backed by private equity firms generated returns of 40.1 percent during 2012 and 19.2 percent during the fourth quarter, according to recent figures from research company Cambridge Associates, which PEI reported earlier.
IMM Private Equity is a Seoul-based independent private equity firm founded in 2001 which has $1.5 billion in assets under management. In December 2012, it closed Fund II oversubscribed on $700 million, according to the firm.