이 기사는 2021년 10월 12일 07시59분 thebell에 표출된 기사입니다

S&I Corp, a wholly owned subsidiary of South Korea’s LG Corp, is looking for a buyer for a majority stake in its construction business in a deal that could be worth as much as 350 billion won ($290 million).

The Seoul-based company earlier this month carved out its construction and facility management divisions into wholly owned subsidiaries in order to sell about a 60% stake in each unit.

The bidding race for the stake in S&I Corp’s facility management unit is underway, with several private equity investors submitting preliminary bids in late August. Meanwhile, the sale process for the construction unit started last week, with GS Engineering & Construction reportedly among potential buyers.

The ServeOne deal in 2019 could be used as a reference to estimate the price tag for S&I Corp’s construction unit, industry watchers said. S&I Corp separated its maintenance, repair and operation unit in December 2018 and sold a 60.1% stake in the unit – which was named ServeOne – to private equity firm Affinity Equity Partners for 602 billion won in February of the following year.

While S&I Corp’s construction unit and ServeOne are not in the same industry, they have a similar business structure as they both heavily rely on revenues from LG’s affiliates. ServeOne recorded sales of approximately 4 trillion won in 2020, with nearly two-thirds of them coming from LG Electronics, LG Chem and LG Display.

Although separate financial data for the construction business is not available, the unit is estimated to have generated more than 70% of its revenue from LG’s affiliates when considering that S&I Corp’s total revenue had similar exposure in the first half of 2021. The construction business accounted for more than half of the company’s overall revenue in the same period.

The ServeOne deal valued the company at roughly nine times earnings before interest, taxes, depreciation and amortization (EBITDA). Based on this multiple and an estimated 2021 EBITDA of 50 billion won to 60 billion won for S&I’s construction business, the unit’s value is estimated to be up to 540 billion won. A 60% stake in the unit is therefore expected to fetch some 350 billion won.

S&I Corp may seek a higher valuation for its construction business in anticipation of stronger financial performance in the coming years.

The company’s construction revenue has declined to the lowest in three years due to few construction projects in the pipeline. S&I Corp expects that construction orders will increase next year, which could lead to steady growth in earnings in the next two to three years. (Reporting by Jeong-wan Lee)