KKR, Macquarie among bidders for over $800 mn stake in LG CNS

KKR, Macquarie’s investment unit, Carlyle Group and Goldman Sachs Principal Investment Area (PIA) have joined a race to buy a stake in LG CNS Co. Ltd., the IT services arm of LG Group, a deal expected to fetch more than 1 trillion won ($824 million).

They are among six preliminary bidders for a 35% stake in the LG Group unit, alongside South Korea-based IMM Private Equity and STIC Investments Inc., according to investment banking sources last week.

Some of the bidders valued the whole company of LG CNS at 3 trillion-3.5 trillion won ($2.5 billion-$2.9 billion).

The stake up for grabs will be the second-largest holding in the system integration (SI) firm after LG Corp., a holding company of the conglomerate.

The holding company is seeking to reduce its ownership in LG CNS from the current 85% to less than 50% to avoid toughened antitrust rules targeting intra-group business transactions.

Among the bidders, KKR and Macquarie are believed to be the most aggressive given that they entered the race earlier than other contenders.

Investment firm KKR had proposed buying a management right in the IT company, but LG Group rejected the offer.

To inject fresh capital into LG CNS, the company is considering selling both existing and new shares to a buyer in a package deal, the sources said.

LG Group expects the planned stake sale will help grow the unit to a global SI company.

LG CNS is one of three LG Group units subject to the revised antitrust rules, under which inter-subsidiary or intra-group business transactions are strictly restricted of both listed and unlisted companies in which the owner family owns more than 20% stake.

The rules also apply to companies over 50% owned by a sister company in which the owner family controls more than 20%.

After LG Group Chairman Koo Kwang-mo was installed last year, the owner family members disposed of their entire stake of 19.9% in Pantos, a logistics arm of LG Group, to Mirae Asset Daewoo Co. Ltd.

The conglomerate also sold a 60% stake in the maintenance, repair and operations (MRO) business of its subsidiary Serveone to Hong Kong-based Affinity Equity Partners for 602 billion won in February.

LG CNS earned 51.1 billion won on sales of 1.4 trillion won in the first six months of this year, compared with a 46.8 billion won net profit against sales of 1.3 trillion won in the same period of 2018.

JPMorgan is handling the stake sale.

By Hugh YH Jeong

hugh@hankyung.com