Korea’s Glenwood PE in spotlight with carve-out deals

South Korean investment firm Glenwood Private Equity Co. is solidifying its leading position with a carve-out strategy in the domestic market, executing four deals this year alone amid a slowdown in the merger and acquisition scene.

“There are always opportunities in large companies’ carve-out deals as they are relatively less sensitive to the economic cycle,” said Glenwood co-founder and CEO Lee Sang Ho. Major companies sell or buy units to narrow their focus during economic downturns, and to fund expansion or new growth engines during recoveries, Lee added.

The four carve-out deals include two acquisitions and two divestments. This year, it bought LG Chem Ltd.’s diagnostics unit for 150 billion won ($115.1 million) and SKC Ltd.’s polyurethane materials maker SK Pucore for 410 billion won.

The PE house sold off the country’s leading glassmaker HanGlas Co. to LX International Corp. for 592.5 billion won and divested PI Advanced Materials Co. to French specialty materials maker Arkema for 1 trillion won.

The PE firm has posted an average 29% internal rate of return (IRR) through six exits since its founding in 2014.

Its consortium with Korea’s NongHyup PE bought Tongyang Magic, a rental service provider of water purification and bidet products, for 280 billion won in 2014 and then sold the company to SK Networks Co. for 610 billion won in 2016, achieving a 33.9% IRR.

In 2016, a consortium of Glenwood and Hong Kong-based Baring PEA, which is now BPEA EQT, bought Halla Cement from Swiss-based Holcim Group for 630 billion won. Glenwood then converted 200 billion won in Halla Cement bonds it held into equities and sold 200 billion won worth of redeemable convertible preference shares to Baring PEA the following year, logging a 13.5% IRR.

In 2018, Glenwood acquired Seorabeol City Gas for 114.6 billion won and Haeyang Energy for 458.4 billion won, from local conglomerate GS Group. Three years later, it sold them to Macquarie Korea Infrastructure Fund, achieving 40.6% and 30% IRRs from the respective assets.

The HanGlas deal with Arkema earlier this year delivered the PE house a 30.1% IRR.

Glenwood’s latest deal, the divestment of PI Advanced, logged a 26.4% IRR. PI Advanced commands more than 30% of the global market of polyimide film, which is used as replacement glass screen in mobile devices.

The PE firm bought a 54.1% stake in PI Advanced for 606.9 billion won in 2020 and injected an additional 176.7 billion won to diversify the material maker’s products into battery insulating films and varnish used to coat EV motors. In turn, PI Advanced’s dependence on the smartphone materials market slimmed down from 86% of its sales to 51%.

In carve-out deals, Glenwood’s exits are valued at a combined 3.4 trillion won to date with 3 trillion won in investments. Its assets under management amount to $2 billion.

Write to Ji-Eun Ha at hazzys@hankyung.com
Jihyun Kim edited this article.