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CJ Logistics seeks to sell construction business; Credit Suisse named as advisor

Aug 20, 2020 (Gmt+09:00)

CJ Logistics Corp. is seeking to sell its profit-making construction business as part of its parent group’s restructuring scheme.

The logistics services unit of CJ Group has selected Swiss-based investment bank Credit Suisse as its sale advisor and is contacting potential buyers, according to investment banking industry sources on August 20. The deal, if successful, would fetch between 200 billion won ($168 million) and 300 billion won ($253 million), they said.

CJ Logistics’ construction unit is specialized in logistics warehouses and R&D centers. According to the Ministry of Land, Infrastructure and Transport, the company ranked 49th in the performance evaluation of construction projects in 2019. But in the construction of logistics storage centers, CJ ranked sixth.

Industry watchers say private equity funds (PEFs) and mid-sized builders are expected to show interest in CJ Logistics’ construction unit, given the rapid growth of parcel deliveries amid the COVID-19 pandemic.

In the second quarter of this year, CJ Logistics recorded an operating profit of 83.9 billion won, above market consensus, on increased parcel delivery demand.

CJ Logistics

CJ Logistics, which also provides land and maritime transportation, international logistics processing, and internet home shopping services, entered the construction business after it absorbed CJ Engineering & Construction Co. in 2018.

Analysts’ estimate of 200 billion won to 300 billion won in the enterprise value of CJ Logistics’ construction business is based on its EBITDA multiple of between 0.3 and 0.5 in 2019, when the unit posted 739.6 billion won in revenue.

“Whether the potential buyer can take over construction orders held by CJ will also affect the pricing of the deal,” said an investment banking source.

The company could sell its construction business after a spin-off as a separate entity, but potential buyers may be more interested in just acquiring the construction unit’s assets, excluding debt.

CJ officials declined to confirm the possible sale of CJ Logistics’ construction business.

By Ri-Ahn Kim and Jun-Ho Cha

In-Soo Nam edited this article

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