이 기사는 2019년 12월 11일 08:00 thebell 에 표출된 기사입니다.

Hong Kong-based private equity firm Baring Private Equity Asia (BPEA), the largest shareholder of South Korea's fifth largest parcel delivery firm Logen Logistics, has sent Information Memorandum (IM) to potential buyers. The preliminary bidding is expected to take place in mid-January next year.

According to mergers and acquisitions (M&A) industry sources on December 5, BPEA and the lead manager Citigroup Global Markets have sent out IM to potential buyers. A total of 15 potential buyers including strategic and financial investors have received the IM.

Amid strong interests from private equity firms, several strategic investors who want to bolster their existing logistics business or newly enter the field have reportedly received the IM and started to review the target company. With South Korea’s e-commerce market growing and logistics business outlook being positive, several potential buyers have shown their interest.

The preliminary bidding for Logen is expected to take place around January 15, 2020. One thing the market should watch for in the Logen deal is whether strategic investors and financial investors will join hands. Until the preliminary bidding takes place, there will likely be moves among financial and strategic investors under the table to form consortia. More potential buyers may appear considering some started to form a consortium with strategic investors.

The logistics service company currently is the fifth largest company in the domestic logistics market with market share of around seven percent, after CJ Logistics, Hanjin Express, Lotte Global Logistics and Korea Post logistics. Major firms have already reshaped the domestic parcel delivery industry. Logen has survived with economies of scale and stably run its business. Strategic investors who seek to enhance their logistics businesses can expect synergies by acquiring parcel delivery firms. Financial investors may find the company attractive given its steady cash generating capacity.

South Korea's parcel delivery industry has grown rapidly amid burgeoning domestic e-commerce market. According to Statistics Korea last year, the total value of online shopping transactions has grown by 20 percent per year over the past five years. As the industry is anticipated to continue its uptrend, Logen is likely to see strong interests.

Logen has specialty in Consumer to Consumer (C2C) business, which generates higher profits. As of the end of last year, Logen recorded sales of 371.7 billion won, operating profit of 20.7 billion won, operating profit margin of 5.5 percent. CJ Logistics, the country’s largest logistics firm, recorded operating profit margin of 1.8 percent last year. Hanjin Express posted 2.1 percent. Lotte Global Logistics recorded a loss of 17.8 billion won over the same period.

Potential buyers may have different views on the company's asset-light business model and the fact that C2C parcels account for 80 percent of total logistics volume. Market views Logen's subcontracting system and insufficient investment in facilities as weak points.

(By reporter Kim Hye-ran)