H&Q lives up to its reputation this year The firm is raising money for its new fund while its portfolio company JobKorea draws attention
이 기사는 2019년 12월 18일 08:00 더벨 유료페이지에 표출된 기사입니다.A South Korean arm of private equity fund H&Q Asia Pacific (hereafter H&Q) has lived up to its reputation in 2019.
The private equity (PE) firm has focused on securing funds this year. It has been raising money for its blind fund for about four months since late July. The firm seeks to raise around 600 billion won and has pooled in approximately 300 billion won thus far, after securing South Korea’s National Pension Service (NPS) as its limited partner.
H&Q has also drawn attention for its strong networks. The firm’s fundraising is expected to go smoothly until the first half of next year. H&Q, the first foreign PE firm that entered the Korean market, formed its first fund in 2005 (300 billion won), second fund in 2008 (372.5 billion won), and third fund in 2013 (564.2 billion won). The country’s major pension funds and mutual aids like NPS, The Military Mutual Aid Association, Korean Teachers' Mutual Fund, Teachers’ Pension and Public Officials Benefit Association participated as limited partners.
H&Q made a partial exit from Il Dong Pharmaceutical in July. The PE firm’s special purpose company (SPC) Sunrise Holdings sold its 10 percent stake in Il Dong Pharmaceutical to Il Dong Holdings, delivering an internal rate of return (IRR) of 15 percent.
The PE firm has put the South Korean kids café operator Playtime Group (former Softplay Korea) for sale. Standard Chartered (SC) Securities is acting as a lead sale manager for the public auction. A preliminary bid is likely to take place this month while the exit deal is expected to close in the first half of 2020.
In the meanwhile, the M&A industry is paying attention to whether the country’s online recruiting company JobKorea will be put up for sale.
Several potential buyers have continued tapping the recruiting company, which heightens the expectation that the firm will play a big role in H&Q’s third blind fund. The exact earnings figures of JobKorea are not known as it doesn't disclose the numbers being a limited liability company. Considering the growth of the industry, the company is expected to have grown in size as well. Its cash generation ability is also considered strong which makes the company attractive.
The market estimates JobKorea’s Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) this year to be around 40 billion won. Given an EV/EBITDA of its peer group at home and abroad is set around 10~15 times, the recruiting company’s price tag including a premium for management rights is expected to fetch hundreds of billions won. “Some PE firms which consider JobKorea as a potential target company are approaching strategic investors before they show intentions to buy it,” said a PE industry source.
According to Saramin HR’s semi-annual report, South Korea’s online job matching platform market size increased 21.9 percent year-on-year to 256 billion won last year. Calculated by subtracting Saramin HR’s sales of 57.5 billion won from the total, other online job matching platform companies including JobKorea are expected to have recorded 198.5 billion won of sales last year, a 26 percent increase from a year ago.
The PE has almost exited the company through a recapitalization last year. H&Q acquired stake in JobKorea in 2013 and 2015 and cashed out on some of its investment (around 80 billion won, excluding acquisition financing) in the company through its recapitalization in May 2018.
Market is paying attention to the firm’s investment in CJ Healthcare and 11 street. H&Q participated in pre-IPO (initial public offering) of CJ Healthcare and the country’s online retailer 11 street via its third fund last year.
Some view it is too soon to make exits as the firm put money in the companies only a year ago. The firm is expected to mull over various ways to exits two companies, including IPO and selling stake to strategic or financial investors.
CJ Healthcare recently has named Korea Investment & Securities, Samsung Securities and JP Morgan as bookrunners for its IPO.
Potential buyers who are interested in an e-commerce industry are expected to show interests in 11 street. H&Q owns a minority stake in the online retailer. If SK Group, which holds management rights of 11 street, sells its stake, the PE firm may use tag-along (co-sale) rights. Whether the group will put its management rights up for sale is likely to be a key when negotiating with potential buyers.
H&Q invested 52 billion won as a financial investor in LS Cable & System Asia, which was established to list LS Cable & System’s Vietnamese subsidiary in the Korean bourse.
LS-VINA, a subsidiary of LS Cable & System Asia in Hai Phong, recorded sales of 400 billion and operating profits of 13.4 billion won last year. H&Q is the second largest shareholder of LS Cable & System Asia, holding 9.66 percent stake, after LS Cable & System (54.58 percent). The market is paying attention whether the PE firm’s may cash out.
(By reporter Rho Arrum)
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