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Private equity exit

IMM PE seeks to exit Korean power cable maker

Oct 15, 2020 (Gmt+09:00)

Taihan Electric Wire factory located in Dangjin, Korea

IMM Private Equity has put a majority stake in South Korea’s Taihan Electric Wire Co. up for sale to exit its investment of close to $300 million in the country's No.2 cable manufacturer in five years.

The Seoul-based private equity firm recently selected a sale manager as well as accounting and legal advisors to kickstart the sale process, according to industry sources on Oct. 15.

IMM PE is offering a combined 75% stake in Taihan Electric, including the 61.3% held by its special-purpose company. At Thursday's market close, the company's market value is 706.6 billion won ($616 million).

In September 2015, IMM acquired 75.5% of then-financially troubled Taihan Electric for around 300 billion won ($262 million). It recently cut its holding to 61.3% through two block sales, pocketing 150 billion won in proceeds from the stake sale.

The planned exit is likely to generate returns of twice its original investment, including the block sale proceeds, based on the market value.

The sale manager Credit Suisse will send invitations and relevant documents to potential bidders next month, with an aim to wrap up the sale within the first half of next year.

Since IMM's acquisition, Taihan Electric has offloaded non-core assets and concentrated on the extra-high voltage cable business, while beefing up overseas operations.

Its robust first-half results and solid business outlook have prompted the private equity firm to seek divesting from the cable manufacturer, the sources said. 

Taihan Electric's first-half operating profit reached 29.1 billion won, marking its highest level in almost a decade on revenue of 741.3 billion won. A series of orders received from foreign countries drove the earnings' rise.

Its ultra-high voltage cables are in demand from the US and Europe, which are upgrading electricity transmission lines to adopt renewable energy. In South Korea, Taihan Electric controls a quarter of the power cable market after bigger rival LS Cable.

The prospective sale could face a backlash from the local government, as Taihan Electric Wire's ultra-high voltage cable manufacturing technology was designated a core South Korean technology last year amid market speculation on the possible sale of the company to a Chinese firm. 

Private equity firms and South Korean power cable manufacturers, including LS Cable, are speculated as potential buyers of Taihan Electric. Some have already expressed their intent to buy the cable maker, according to the sources.

Separately, IMM PE recently divested of its 82 billion won investment in Hollys Coffee by selling the coffeehouse chain to Korea’s chemical- to steel-focused KG Group. It is also in the process of exiting online clothing store W Concept, based in Korea.

Write to Chae-Yeon Kim at why29@hankyung.com

Yeonhee Kim edited this article

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