Macquarie seeks co-investors for over $2 bn Korean gas firm purchase

Macquarie’s investment unit may attract Singapore’s sovereign wealth fund GIC and other limited partners of its Asia infrastructure fund as co-investors for its latest South Korean acquisition of more than 2.5 trillion won ($2.1 billion), according to sources with knowledge of the matter.

The infrastructure fund signed a share purchase agreement with MBK Partners on Dec. 14 to take the full ownership of unlisted Daesung Industrial Gases Co. Ltd., South Korea’s largest industrial gas producer.

GIC and other limited partners of the fund are considering co-investing in the transaction, the sources added.

But they declined to give details on the LPs and their prospective investment.

“Macquarie was able to make an aggressive offer by using the infrastructure fund which tends to set lower return targets than management-seeking funds. It was the key success factor for this transaction,” said one of the sources.

Macquarie, one of aggressive private equity investors in Korea, had approached MBK to buy the company. Its offer price of around 2.5 trillion won represents 13 times projected EBITDA for 2020.

Daesung Industrial expects its EBITDA to rise to more than 200 billion won next year, bolstered by a new long-term contract. Last year, its EBITDA came to 149.3 billion won.

Morgan Stanley advised MBK Partners for the transaction,, while Lazard Korea worked for Macquarie.

PROCEEDS FOR MBK

MBK Partners is set to reap more than 1 trillion won ($850 million) in proceeds from the exit in less than three years, including the proceeds from loan refinancing.

In 2017, it acquired then the financially distressed company for $1.7 trillion from Goldman Sachs’ private equity arm PIA and the gas producer’s parent company.

The Seoul-based private equity firm had also secured double-digit returns from two other billion-dollar Korean deals -- Orange Life Insurance Ltd. and water purifier Coway – in 2018 and 2019.

The proceeds from the two divestitures are estimated at 2 trillion won and 1 trillion won, respectively.

Meanwhile, Macquarie’s South Korean unit signed a definitive agreement on Dec. 6 to buy a non-controlling stake in LG CNS Co. Ltd., an IT services arm of LG Group, for 951.6 billion won.

Write to Donghun Lee and Sang Eun Lee at leedh@hankyung.com">

leedh@hankyung.com