Macquarie tipped to buy Korea’s top industrial gas producer for $2.2 bn

Macquarie Group has approached MBK Partners to acquire Daesung Industrial Gases Co. Ltd. and offered around 2.5 trillion won ($2.2 billion) for full ownership of the South Korean company, in a deal that would generate proceeds of more than 700 billion won for MBK in almost three years.

The Australia-based investment bank is now undertaking a due diligence study on the largest industrial gas producer in South Korea, aiming to sign a share purchase agreement (SPA) in December, sources with knowledge of the matter told the Korean Investors earlier this week.

Separately, Macquarie was chosen on Nov. 6 as the preferred buyer of a 35% stake in LG CNS Co. Ltd., an IT services firm of the LG Group, in a transaction worth 1 trillion won. It is set to enter into an SPA with LG Corp. which has a majoriry stake in the IT unit, within this month, according to other sources.

It beat other private equity firms TPG Capital and PAG, formerly known as Pacific Alliance Group, in the auction.

“Industrial gas companies are favorite targets of PEFs because of their high entry barriers and stable earnings outlook,” one of the sources told the Korean Investors.

“The global gas industry has been undergoing a reorganization over the past few years, which is pushing the bidding prices higher.”

Daesung Industrial was set up as a joint venture between Air Liquide, a French company, Daesung Industrial Co. Ltd. in 1979.

It supplies gases to Korean semiconductor companies in long-term contracts.

Its operating profit rose by 27% to 93.8 billion won in 2018 from a year before, on sales of 566.6 billion won which is up 5%.

Macquarie has been ramping up private equity business in South Korea.

Last year, it acquired ADT Caps, a Korean security services firm, in a consortium with SK Telecom Co Ltd. for $2.5 billion.

For the non-controlling stake in LG CNS, Macquarie won higher scores than KKR in non-price factors such as global strategy and business cooperation plans with LG Group, according to the sources.

KKR had made attractive offers with a similar bid price to Macquarie’s.

By Donghun Lee and Chaeyon Kim

leedh@hankyung.com