Korea's Hahn & Co in $134 million buyout

Morgan Stanley spinout Hahn & Co has revealed the seventh investment from its debut fund just 18 months after final close.

Seoul-based Hahn & Co plans to invest 145 billion KRW (€99 million; $134 million) for a controlling stake in Korea Line, one of the country’s largest shipping companies, Scott Hahn, co-founder of Hahn & Co, told Private Equity International

Korea Line had been in court receivership. Hahn & Co was one among several bidders, including chaebols CJ Group and SK Group, and was selected as the “exclusive preferred bidder”, Hahn said. The firm will get full operational control through a 50 percent stake.

The deal will represent the seventh investment from Hahn & Co’s debut fund, which closed in July 2011 and is now 50 percent invested, Hahn said. Since the fund closed, he believes his firm has done more transactions than foreign and domestic competitors in Korea combined.

The bid for Korea Line was “right at liquidation value” he said. “We managed to get a controlling stake at liquidation value in a country with big control premiums.”

Korea Line was established in 1968 and is one of the most well-known shipping companies in Asia, according to Hahn. It grew to become one of Korea’s top four shipping companies with an enterprise value of 1.1 trillion KRW. 

The business was in receivership due to excessive leverage and speculative activities on ship chartering during the shipping upcycle. Korea Line is not focused on export-oriented activity, but is a bulk carrier business, importing natural resources and raw materials for Korean industry, Hahn said, adding that Korea is the world’s thirteenth largest economy and it has no fossil fuels.

He believes Korea will have more restructuring deals, but they are difficult to execute without an established local presence. A private equity firm has to build a long relationship with a troubled business well before it enters the court receivership process, which he describes as “rapid fire”. 

In May, Hahn & Co closed two controlling stake deals in Korea-based firms, Coavis, an auto parts maker and, through a court auction process, cement supplier Daehan Cement.

Hahn & Co is a 2010 spinout from Morgan Stanley Private Equity Asia and it targets buyouts and corporate restructurings in the mid-market space.