Skip to content
  • KOSPI 3278.68 +20.05 +0.62%
  • KOSDAQ 998.49 +1.12 +0.11%
  • KOSPI200 436.96 +2.83 +0.65%
  • USD/KRW 1117.8 1.40 0.13%
  • JPY100/KRW 1,015.63 1.32 0.13%
  • EUR/KRW 1,355.5 2.31 0.17%
  • CNH/KRW 174.57 0.17 0.10%
View Market Snapshot

Stake sales

Hanon sale takes shape; Valeo, Mahle, LG among potential bidders

The $7.2 billion deal is set to be Korea’s largest acquisition transaction ever

By Jun 10, 2021 (Gmt+09:00)

Hanon sale takes shape; Valeo, Mahle, LG among potential bidders

The much-touted sale of South Korea’s Hanon Systems Corp. is taking solid shape with names of potential bidders floating around in the market for a deal set to be the country’s largest acquisition transaction.

According to investment banking sources on June 10, several automotive parts suppliers and global private equity firms are seeking to gain control of Hanon Systems, up for sale by its current owners, Hahn & Co. and Hankook Tire & Technology Co.

About 10 interested parties from Korea and abroad have received an information memorandum on the deal from Hanon’s joint sale managers, Morgan Stanley and Evercore Inc.

Potential bidders are requested to make preliminary bids from June 22.

Among those interested are French automotive supplier Valeo, German auto parts manufacturer Mahle GmbH and LG Group, the sources said.

In late May, sources said Korea’s Halla Group, former owner of Hanon Systems, is seriously considering joining the race to retake the thermal management systems supplier.

Global PE firms such as KKR, Carlyle and TPG are also showing interest in a controlling stake in Hanon Systems. The financial investors are likely to form consortiums with strategic investors to raise their chances of winning the bid, they said.

HANON PURCHASE TO BOOST RANKING IN THERMAL SYSTEMS MARKET

Last month, Hahn & Co. and Hankook Tire put up their combined 69.9% stake for sale to exit from their investments and book gains.

Hahn & Co. is the largest shareholder of Hanon Systems with a 50.5% stake and Hankook Tire is the second-largest stakeholder with a 19.49% stake.

Hanon sale takes shape; Valeo, Mahle, LG among potential bidders

The two largest shareholders of Hanon purchased a 69.9% stake in the Korean thermal management systems supplier for a combined 3.8 trillion won ($3.4 billion) from Visteon Corp., a US automotive electronics supplier, in 2014.

Hanon Systems’ market capitalization stands at 9.3 trillion won as of Thursday, valuing its near 70% stake at around 6.5 trillion won and if the management premium is included, the sale price could rise to 8 trillion won ($7.2 billion), industry officials said.

In 2020, the company posted an operating profit of 315.8 billion won on revenue of 6.87 trillion won.

Hanon manufactures and sells a wide range of products, including air conditioners, heaters, cooling modules and compressors. The company is the world's No. 2 thermal management systems supplier for automakers with a 13% market share, following Japan’s Denso, which controls 28% of the market.

In the electric vehicle era, superior thermal management systems are essential to regulating energy efficiency. The growing EV market is expected to increase demand for Hanon's battery thermal management systems.

Hanon's high-profile client portfolio is another attractive factor. Its clients include Korea's leading automakers Hyundai Motor Co. and Kia Corp., alongside global auto firms such as Ford, Volkswagen, GM and Tesla.

LG, VALEO, MAHLE IN TIE-UPS WITH FINANCIAL INVESTORS

Sources said the potential bidders are in discussions over how to form consortiums to raise their winning chances.

Hanon System's battery-powered heater
Hanon System's battery-powered heater
It is understood that Carlyle has approached LG Group for a joint bid.

Among LG Group affiliates, LG Electronics Inc. is most likely to join hands with Carlyle, but a consortium between Carlyle and LG Magna e-Powertrain Co. is also a possibility, according to the sources.

LG Electronics has identified the EV auto parts industry as a main growth driver after exiting from its loss-making mobile phone business. Last year, LG entered a $1 billion joint venture with Canada’s Magna International Inc. to develop EV components and boost its footing in the EV market.

LG Electronics also acquired Austria-based premium lighting systems maker ZKW in 2018 for about one trillion won.

According to sources, France’s Valeo, the world’s third-largest thermal management systems supplier with a 12% market share, is seeking to tie up with Bain Capital, a US investment firm.

Germany’s Mahle has chosen an unidentified global investment banking firm for a joint bid, they said. Mahle, the world’s fourth-largest thermal systems supplier with an 11% stake, entered the market in 2015.

Write to Jun-Ho Cha at chacha@hankyung.com

In-Soo Nam edited this article.

Comment 0

0/300