Baring PEA in talks with CVC, Affinity to sell Korean parcel delivery firm
Jul 25, 2016 (Gmt+09:00)
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Baring Private Equity Asia (PEA) has resumed the sale process of South Korea’s No. 4 package delivery company, and authorized two private equity firms CVC and Affinity Equity to conduct due diligence of Logen Co. Ltd., investment banking sources said on July 24, in a deal estimated at $250 million-$340 million.
Europe-based CVC Capital Partners and Hong Kong-based Affinity Equity Partners had been among preliminary bidders of the unlisted South Korean logistics and parcel delivery firm, but the two firms failed to make it to the shortlist unveiled in March.
After all the shortlisted bidders - Germany’s DHL, UPS and South Korean private equity fund STIC Investments – dropped out of the race because of price differences, the South Korean parcel delivery firm was put back on the market. Industry sources had told the Korea Economic Daily in June that the agent-based business model of Logen, strange to foreign companies, and concerns about integration with a smaller domestic parcel delivery firm that Baring PEA had acquired last year were also behind the breakdown of negotiations with the final shortlisted bidder UPS.
“It is understood that the selling side has recently authorized the two financial investors who had shown interest (in Logen) to conduct due diligence,” one of the source told the Korea Economic Daily, referring to CVC and Affinity Equity. “There is a growing likelihood of selling Logen to one of the two (funds).” Upon completion of the due diligence by next month, they are expected to enter negotiations on details, according to the sources.
CVC is known to have a keen interest in South Korea’s package delivery business. CVC’s Korean operation is led by Steve Lim, who had headed J.P.Morgan’s Korean operations.
“(CVC) is understood to be determined to buy it, as long as they reach a price agreement,” the source said. Affinity also has been in talks with the selling side until recently, after the planned sale of Logen to a shortlisted bidder fell through.
Baring PEA had put unlisted Logen up for sale earlier this year, about three years after it acquired the whole of the firm for 158 billion won ($139 million) in 2013. J.P.Morgan is managing the sale. The key to the transaction seems to be the price.
According to the sources, Baring PEA had suggested a 400 billion won range for the sale of the South Korean company, including a management rights premium. But only one bidder in the March preliminary auction offered more than 300 billion won for the deal. Market speculation is that CVC and Affinity bid the early end of 200 billion won.
“It is unlikely that the two candidates would raise the bidding prices competitively,” another investment banking source said. “Given that if this sale fails again, the seller has to find an alternative such as an IPO, it will be difficult to stick to a high price only.”
Baring PEA will receive a final bid from CVC and Affinity after they complete due diligence by mid-August. If one of them drops out of the race, Baring may switch to a private deal.
By Soram Jung and Donghoon Lee
ram@hankung.com
Europe-based CVC Capital Partners and Hong Kong-based Affinity Equity Partners had been among preliminary bidders of the unlisted South Korean logistics and parcel delivery firm, but the two firms failed to make it to the shortlist unveiled in March.After all the shortlisted bidders - Germany’s DHL, UPS and South Korean private equity fund STIC Investments – dropped out of the race because of price differences, the South Korean parcel delivery firm was put back on the market. Industry sources had told the Korea Economic Daily in June that the agent-based business model of Logen, strange to foreign companies, and concerns about integration with a smaller domestic parcel delivery firm that Baring PEA had acquired last year were also behind the breakdown of negotiations with the final shortlisted bidder UPS.
“It is understood that the selling side has recently authorized the two financial investors who had shown interest (in Logen) to conduct due diligence,” one of the source told the Korea Economic Daily, referring to CVC and Affinity Equity. “There is a growing likelihood of selling Logen to one of the two (funds).” Upon completion of the due diligence by next month, they are expected to enter negotiations on details, according to the sources.CVC is known to have a keen interest in South Korea’s package delivery business. CVC’s Korean operation is led by Steve Lim, who had headed J.P.Morgan’s Korean operations.
“(CVC) is understood to be determined to buy it, as long as they reach a price agreement,” the source said. Affinity also has been in talks with the selling side until recently, after the planned sale of Logen to a shortlisted bidder fell through.
Baring PEA had put unlisted Logen up for sale earlier this year, about three years after it acquired the whole of the firm for 158 billion won ($139 million) in 2013. J.P.Morgan is managing the sale. The key to the transaction seems to be the price.
According to the sources, Baring PEA had suggested a 400 billion won range for the sale of the South Korean company, including a management rights premium. But only one bidder in the March preliminary auction offered more than 300 billion won for the deal. Market speculation is that CVC and Affinity bid the early end of 200 billion won.
“It is unlikely that the two candidates would raise the bidding prices competitively,” another investment banking source said. “Given that if this sale fails again, the seller has to find an alternative such as an IPO, it will be difficult to stick to a high price only.”
Baring PEA will receive a final bid from CVC and Affinity after they complete due diligence by mid-August. If one of them drops out of the race, Baring may switch to a private deal.
By Soram Jung and Donghoon Lee
ram@hankung.com
Yeonhee Kim edited this article
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