China logistics firms yield decent returns for Korean investors

MBK Partners and two leading South Korean conglomerates – SK and CJ groups – have chalked up hefty returns from investments in Chinese logistics companies, as the neighboring country is increasingly embracing e-commerce that boosts freight demand.

MBK has secured a 37% internal rate of return from its 190 billion won ($170 million) investment in Apex International Corp., after it divested its entire stake in the leading air freight company in China, according to investment banking sources on Mar. 2.

The North Asia-focused private equity firm signed a binding agreement with Kuehne + Nagel, a German logistics company, to sell its 64% stake in the Chinese freight forwarder for an undisclosed sum last month.

The investment banking sources put the transaction value at around 1 trillion won, equivalent to four to five times MBK’s investment principal.

The IRR from the Apex deal surpasses the average return of 31.4% logged by MBK Partners III as of the end of 2019. The blind pool fund had acquired Apex for a combined 190 billion won since it bought its controlling stake for $85 million in 2015.

Seller	Company	Size of stake sold	Purchase Price	Sale Price	Buyer
MBK Partners	Apex International	64%	190 billion	around 1 trillion	Kuehne + Nagel
CJ Logistics	CJ Rokin Logistics	73.1%	455 billion	733.8 billion	FountainVest Partners
SK Holdings	ESR	4.6%	205 billion*	480 billion	block deal
Note: * Based on KED Global Edition's calculation. (Unit: Korean won)

Last month, a Korean consortium led by CJ Logistics Co. sold its 73.1% stake in CJ Rokin Logistics & Supply Chain Co. to China-based investment firm FountainVest Partners for 733.8 billion. South Korea’s National Pension Service and Seoul-based private equity firm STIC Investment participated in the consortium. They had acquired the majority stake for 455 billion won in 2015.

CJ Rokin specializes in the cold chain for products that require refrigerated temperatures and is being touted as a distribution channel of COVID-19 vaccines. Since the acquisition, CJ Logistics has jumped into China’s fresh grocery delivery market.

Last year, SK Holdings Co. netted 480 billion won from the block sale of a 4.6% stake in ESR Cayman Ltd., after the logistics real estate developer went public.
SK Holdings had bought an 11% stake in ESR Cayman for 490 billion won between 2017 and 2018, in a pre-IPO investment.

Its remaining holdings in ESR, in which Warburg Pincus is the largest shareholder, is now worth 710 billion won, based on its market value.

E-commerce transactions are expected to represent more than half of China’s private consumption from this year. M&A deals involving Chinese logistics companies were valued at $5.5 billion up to date, heralding the most active first quarter of acquisition deals for the sector in the country's history, according to Bloomberg.

“China is increasingly attractive for us as a private equity market, given its scale and growth,” MBK co-founder and Chairman Michael ByungJu Kim said in a statement released after the Apex transaction. “Our recent transactions in CAR Inc. and Apex Logistics highlight our commitment to this important market.”

He referred to MBK’s 20.86% stake purchase of China’s No. 1 rental car service provider Car Inc. for $228 million in November 2020.

Write to Jun-ho Cha at chacha@hankyung.com
Yeonhee Kim edited this article.